Wednesday, January 5, 2022

Rising Tide of Complaints Over Perceived Profiteering by Global Container Shipping Lines

Forwarding Agents Association Expresses the Views of its Members to UK Government
Shipping News Feature

UK – WORLDWIDE – The British International Freight Association (BIFA), which represents the bulk of respectable freight forwarders in the country, has added its voice to the growing clamour with regard to the latest activities of the principal global container shipping lines.

BIFA is joining a growing number of organisations, including CLECAT and FIATA, the US Federal Maritime Commission (FMC), and the Australian Productivity Commission, in calling for governments at a national and pan-national level to give careful consideration to the evolving business arrangements in the container shipping market to see whether they are in breach of competition law.

The latest BIFA comments will doubtless engender an episode of déjà vu amongst older industry readers. The seemingly never ending cycle of trade regularly sees a shortage of goods and oversupply of vessels which in turn leads to a buoyant ship breaking market, only for the situation to reverse itself as trade grows and the services of the ocean carriers evolve to manage the situation.

Such is now the case with the recent hike in container rates and the imbalance of empty containers for return, particularly to the Far East, which the container companies claim loses them money, putting the resulting increase in detention and demurrage charges firmly at the foot of the shippers, many of whom blame their agents. This situation alone has already produced action in the US House of Representatives giving more power to the FMC.

Now BIFA has vocalised the objections of its members who are concerned that certain practices undertaken by the principal container shipping lines, as well as easements and exemptions provided to them under competition law, are distorting the operations of the free market to the detriment of international trade.

In a letter to Robert Courts MP, Parliamentary Under Secretary of State at the Department for Transport, BIFA's Director General Robert Keen expresses the trade association’s concern that during a period of well-documented chaos within the container shipping sector, commercial power is becoming increasingly concentrated, resulting in diminished market choice and competition, and distorted market conditions. Keen says:

“BIFA members fully accept that a free market economy is open to all, but are increasingly concerned that the activities of the container shipping lines, and the exemptions from legislation from which they benefit, are distorting the operations of that market to the shipping lines’ advantage, whilst adversely and unfairly affecting their customers, especially freight forwarders and SME businesses.

“The facts speak for themselves. During a period that has seen EU block exemption regulations carried forward into UK law, there has been huge market consolidation. In 2015, there were 27 major container shipping lines carrying global containerised trade, with the largest having a 15.3% market share. Today, there are 15 shipping lines, organised into three major alliances carrying that trade, with some analysts observing that the market share of a single alliance on certain key routes could be over 40%.

“The pandemic has highlighted and accelerated this development, which has also contributed to dreadful service levels, and hugely inflated rates, with carriers allocating vessels to the most profitable routes with little regard to the needs of their customers. Drewry recently issued a profit forecast of more than $150 billion for 2021 for the main container shipping lines for which financial results are available. To put that into perspective, this is more than has been achieved in the previous 20 years combined, and many BIFA members consider it to be a case of blatant profiteering.”

Photo: Containers are stacking up worldwide. Image courtesy of the Port of Los Angeles.