Tuesday , 12 November 2019
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TOC Europe: Ending the alliances would see freight rates “skyrocket”

Shipper opposition to the operation of deep sea liner shipping alliances may be dangerously misplaced, delegates at the TOC Europe heard last week

Lars Jensen, chief executive and partner of SeaIntelligence Consulting, said that efforts by some to bar container lines from operating in alliances, claiming that they have become anti-competitive – such as the International Transport Forum’s report earlier this year – would result in freight rates “skyrocketing”.

The EU’s Block Exemption Regulation (BER), which is the de facto legislation covering liner alliances and vessel sharing agreements (VSAs) on container trades to and from Europe, is set to expire on April 25, 2020, and European Commission regulators are currently assessing whether to extend it for a further five years.

Jensen stated: “If the anti-trust exemption isn’t extended that doesn’t necessarily mean that shipping lines can’t run alliances, it may well just mean that the lines have higher hoops that they have to jump through, and I have no doubt that they will do that, but it will mean a lot in legal costs and the carriers will have to recoup those costs and the only way they can do that is through higher rates.”

“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 ships (ULCVs) effectively.”

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

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

“Now, if you are shipping from Shanghai container yard to Rotterdam container yard 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 used and shippers will be faced with an enormous jump in freight rates. So I am of the opinion that shippers should pray that lines are allowed to continue to operate alliances.”