2021 carrier bonanza could presage a crash of the ocean titans in 2022

Reading supply chain industry tea leaves has become near-impossible over the past couple of years. Nonetheless, the first missive from Fiata this year contains some notably spikey wording, which suggests 2022 will see increasing opposition to the growing influence of cash-rich box shipping lines outside their core business.

Newton’s third law of motion contends that, when two bodies interact they apply an equal force to each other, but in opposite directions. This may be one of the cornerstones of his theory of gravity, but it has also been applied in other fields of academic research, including economics and, after liner shipping’s pandemic-era profit surges, the signs are that there will be a substantial backlash from their principal customers/partners/competitors… the freight forwarders.

Fiata said: “The recent notice to users of the freight services of AP Møller-Maersk Group and its integrated services which restricts access for international freight forwarders in many economies through shifts from contracted arrangement to spot rates, raises serious concerns as to significant changes in business practice and the long established lex mercator in the shipping industry.”

In purely business terms, freight forwarders are currently in a weak position. Capacity remains exceptionally tight and, in any case, it is up to the shipping lines to assign their capacity however they wish.

Secondly, the highly fragmented nature of the freight forwarding sector almost precludes any co-ordinated response in the same way, for example, that the liner shipping alliances were able to address the anticipated contraction in volumes during the early days of the pandemic through blank sailings.

Necessity being the mother of invention, the best recourse for forwarders to strengthen their position will be through the law, and the Fiata statement focuses on the special privileges many shipping companies have enjoyed for decades: the block consortia exemption in Europe, various state subsidies that from time to time have staved off bankruptcies and so on…

Fiata director general Dr Stéphane Graber said: “These changed arrangements, which have been accelerated and facilitated by the pandemic, have resulted in significant unanticipated profits by these ‘few’ and their ability to determine the viability of others offering freight services in a now highly disrupted and volatile marketplace.

“Their integration allows them to make price differentiations, which impacts free market competition. It is highly regrettable that these profits are not better used to invest in decarbonisation and a more sustainable maritime industry.

“The protection afforded to shipping lines under a variety of economies’ antitrust/anticompetitive legislation is, in reality, a relic of the past and must now be questioned in all jurisdictions as to shipping line marketplace domination, competitive neutrality and price setting,” he added.

Certainly, in respect to EU legislation, carriers have been sailing close to the wind for a number of years, but the lack of legal action can be explained by the fact that, for most of the time, they simply didn’t have any money. Now that they do, the lawyers are suddenly far more interested, and The Loadstar knows several cases claiming antitrust infringements by carriers that are in pretty advanced states of preparation.