News / 'An end to shipping alliances would see freight rates skyrocket'

19/06/2019

Shipper opposition to deepsea liner shipping alliances may be dangerously misplaced, delegates at the TOC Container Supply Chain event in Rotterdam heard yesterday.

Lars Jensen, chief executive and partner of SeaIntelligence Consulting, said efforts by some to bar container lines from operating in alliances, claiming they have become anti-competitive, would result in freight rates “skyrocketing”.

The EU’s Block Exemption Regulation (BER), the de facto legislation covering liner alliances and vessel-sharing agreements (VSAs) on container trades to and from Europe, is set to expire on 25 April next year, and EC regulators are assessing whether to extend it for five years.

Mr Jensen said: “If the anti-trust exemption isn’t extended, it doesn’t necessarily mean shipping lines can’t run alliances. It may well just mean the lines have higher hoops to jump through, and I believe that they will do that.

“But it will mean a lot of legal costs and the carriers will have to recoup those costs and the only they can do that is through higher rates,” he added.

“However, if shipping alliances are outlawed altogether, then freight rates will skyrocket, because alliances are the only way that carriers can operate ultra-large container vessels (ULCVs) effectively.”

He explained that, on its own, Maersk Line could only run two Asia-Europe services a week, and even then it would have a much more limited port rotation than under its 2M alliance with MSC.

“I think you would see these services calling at just three Chinese export ports and three main European port calls. And MSC is in the same situation.

“Now, if you are shipping from Shanghai’s container yard to Rotterdam’s, then that’s fine, rates will stay relatively low. But for any other origin or destination you will have to use far more transhipment than currently, and shippers would be faced with an enormous jump in freight rates.

“So I am of the opinion that shippers should pray the lines are allowed to continue to operate alliances,” he said.