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Chris Bryant from Bloomberg Opinion reported on 19 August about the current situation in liner shipping, the potential long-term consequences and what can be done by the carriers to improve their image towards consumers and policymakers. The article recalls the extraordinary financial results shipping lines will realise this year, thanks to ever-increasing freight rates: container lines could collectively make $100 billion in operating income in 2021, according to Drewry.

These high freight rates, combined with cancelled or delayed voyages and congestion surcharges lead to backlash and trigger complaints of profiteering. Chris Bryant refers in this opinion to the recent developments in the US, with the Congress calling for a revision of the Shipping Act, and the White House tasking the FMC to investigate into possible competition concerns and unlawful detention and demurrage surcharges. The current disruptions in liner shipping also raise concerns for the upcoming peak Christmas season, when goods from Asia will start to be shipped to Europe and America, which could put further strain on the system. Therefore, any improvements on the maritime supply chain would not be visible until next year according to analysts.

The article also looks at the preferential tax system shipping lines are benefiting from. Most of these companies enjoy tonnage tax, resulting in very low effective tax rate when profits surge: Maersk’s effective tax rate was less than 5% during the most recent six-month period, while Hapag-Lloyd’s tax expenses were less than 1% of its pre-tax income, according to Bloomberg data. Shipping lines also succeeded in lobbying for an exemption from a global push to apply a 15% minimum corporate tax rate (the only industry exempted from the global tax framework), described as a missed opportunity for reform by the columnist.

The greening of the industry is also evoked, with the IMO targeting only a 50% cut in emissions by 2050, which is deemed too low to meet the objectives of the Paris Agreement. However, some shipping lines set more ambitious targets and welcomed the inclusion of shipping in the EU Emissions Trading Scheme. They also call on EU policymakers to set up a $5 billion fund to finance research into more environmentally friendly fuels and propulsion. Finally, the article notes that ‘container lines with the profits they are making this year, could afford to be more generous. Climate investments are a better look than dividends and share buybacks, and would make that cash windfall harder to begrudge.’

Source: Bloomberg Opinion