News / NITL claims alliances create 'super-carrier distortion' to liner shipping market

As the US regulator hears claims that carriers are failing the chemical industry, vociferous shippers have pointed to alliances which they say are not working for the millions of US businesses that rely on the liner shipping market for the movement of containerised goods.

Speaking exclusively to The Loadstar, Lori Fellmer, second vice chairman of the National Industrial Transportation League (NITL) and VP of logistics and carrier management at shipper BassTech International, said while shippers and carriers could benefit from the “operational co-operation” allowed by the alliance structure, the “imbalance of power” meant the system was not working for the majority of small and medium-sized shippers.

“Shippers can’t negotiate transactions on a level playing field, the deck is stacked against small and medium-sized shippers, [which means] it’s not a genuine negotiation, it’s a ‘take it or leave it’ situation,” explained Ms Fellmer.

According to her, when the carriers promptly pulled capacity at the outset of the pandemic, which did not get returned as quickly as it had been removed, “I thought, this is the future”.

Some 25 years ago, there were far more carriers, but consolidation in the market has meant significant carriers have disappeared, but then when the alliance structure was constructed the situation changed substantially, said Ms Fellmer.

“When carriers aligned into alliances it effectively created three super-carriers,” she argued, and it is this situation that the Ocean Shipping Reform Act of 2021 (OSRA21), promoted by two congressmen, John Garamendi and Dusty Johnson last month, was seeking to redress. It is expected that OSRA 2021 will offer greater powers to the Federal Maritime Commission (FMC) to act on complaints.

In particular, the FMC has heard representations from agricultural exporters claiming they have not been supported by carriers “more interested in shipping empty containers back to Asia so that they can take advantage of soaring US import freight rates”.

And on 2 September, the FMC’s Carl Bentzel heard from representatives of the US chemical industry also claiming carriers are not supporting them, in contravention of the US requirement that services should be available to all shippers equally.

Mr Bentzel noted: “I am troubled by reports that ocean carriers might be refusing to serve shippers importing hazardous materials. The inability to import these commodities could, in turn, harm US manufacturers and potentially jeopardise US programmes related to water purification and other strategic services and commodities that rely on the movement of international cargo of hazardous materials.”

He added: “Given the potential implications of systemic refusals by shipping lines, I am urging that we broaden the scope of the Vessel-Operating Common Carrier Audit Program to include review of whether there have been any systemic decisions by ocean carriers to discriminate against hazardous materials transportation. Such a review could be conducted within the existing audit programme, and will make FMC oversight more focused and thorough during this volatile time.”

Moreover, shipper MCS Industries has filed a formal complaint against two carriers, alleging collusion and an abuse of their dominant position, as reported by The Loadstar in August.

One of the two carriers named, MSC, has said it would vigorously defend its position, but the mounting pressure on carriers could see changes to the regulatory system, particularly if the complaint is upheld.

Ms Fellmer believes shippers “need to speak up and highlight the situations that they find themselves in.” However, she acknowledges this would, “take time and energy and would raise other concerns about retribution [from carriers on shippers], no-one wants to make enemies of the carriers”.

However, the concerns over retribution, which Ms Fellmer says will be addressed in the OSRA 2021 legislation, means it is unlikely that other shippers will follow in MCS’s footsteps – “other shippers will watch what happens with MCS”, she said.