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The International Transport Forum published this week an independent report on the performance of maritime container supply chains. The report brings together much of the data ITF has collected over the last couple of years on the ocean carriers’ behaviour in the market. CLECAT welcomes the landmark document and the urgent call of the thinktank to focus attention regulatory attention on fair competition in door-to-door container transport.

Importantly, the report recommends competition authorities to urgently pay attention to the vertical integration in the carrier industry, and to make sure that there is fair competition in the markets where carriers have started to compete such as the land-side port and logistics markets.

Nicolette van der Jagt, Director General of CLECAT noted: “We are pleased that the ITF has fully recognised the challenges the ongoing vertical integration by the container shipping industry poses to competition regulation. This is especially the case if shipping companies can use their antitrust immunity and their leverage as carriers to acquire competitive advantages in markets where they compete with freight forwarders, port service providers or logistics operators that do not have antitrust immunity. The denial of forwarder access to contract rates by Maersk and Hamburg-Sud is only one of the examples of market abuse mentioned supported by vertically integrated door-to-door services. Not only do freight forwarders suffer from the discriminatory practices towards them; this is also the case for shippers and end-consumers due to the lack of service options.”

In addition, the report draws important conclusions on elements which should be investigated by every competition authority including the enhanced monitoring of competition in container shipping.

Ms van der Jagt added: “It is about time for the European Commission to urgently revise their competition framework to reflect the reality of the container shipping market and ensure they capture the full extent and effects of shipping line co-operation, as experienced by freight forwarders and other parties in the maritime logistics supply chain. The independent findings of the International Transport Forum confirm CLECAT’s view that the remedy does not lie in amending the current Consortia Block Exemption Regulation as this exemption is beyond repair and no longer fit for purpose. There will be a need to fundamentally reshape the rules and consider new legal instruments as competition authorities are no longer able to enforce open-ended regulations.”

Reviewing the detail of the analysis, CLECAT notes the key findings on what has been going on in the container shipping market since the beginning of the pandemic:

1. Utilisation rates of only 70% are not consistent with an ‘explosion’ in demand for container transport.
2. The return of idled capacity to the market during Q3 2020 appeared to lag the recovery in spot rates and did not proceed as fast as capacity withdrawal during Q1 & Q2. Regulators should therefore reconsider competition arrangements for liner shipping by restraining possibilities for joint capacity management.
3. Traditional market concentration indicators applied to the container shipping sector do not take into account the effects of alliances and consortia. Regulators should therefore use the more accurate MHHI index in their assessments of the container shipping market, and the concentration of the market share achieved through all agreements permitted under block exemption and antitrust immunity provisions.
4. Port congestion is a product of fluctuating schedule reliability, not the other way round as ocean carriers have claimed. Furthermore, carriers have benefitted from the port congestion, as it generates scarcity in ship capacity that can sustain high freight rates.
5. The lack of competition has led to a poor service quality to shippers and freight forwarders with schedule reliability dropping to 35% in January 2021 compared to 65% in February 2020.
6. The top container shipping lines made an estimated USD 160 billion over 2021 (Alphaliner, 2022) which supported them in acquiring logistics companies and forwarders, raising competition issues, whilst investing a negligible share of their profits in decarbonising their activities.
7. A decline in port connectivity in most world regions and with this the traditional multi-port string schedules and additional need for transhipment

Finally, CLECAT welcomes the recommendation to regulators and the industry to secure better performance information. This recommendation is based on the discussions that the ITF convened through the Global Maritime Logistics Dialogue (GMLD) of which CLECAT was an integral part since its launch in May 2019. The forum defined a set of commonly accepted key performance indicators (KPIs) for the maritime logistics supply chain.

CLECAT considers progress of the GMLD particularly important as meaningful KPIs could provide possibilities for improved communication and reliability between the different actors in the shipping sector, leading to a better performance of the whole maritime logistics chain. Ms van der Jagt commented: "The reality is that indicators identified by the Forum proved to be essential and have been largely deteriorated over the last couple of years, making the job of freight forwarders very burdensome. This relates in particular to reliable data on the advance notice of arrival: for instance, a real improvement in the container supply chain would be the possibility to obtain the data on vessel arrival, which could generally be considered correct and sufficiently reliable to start planning the pick-up of containers and the rest of the work, approximately 5 days prior to the actual arrival of the vessel. Over the last year, forwarders even failed to receive data on vessel arrival and forwarders had to actively seek for it."

She continued: "Furthermore, blank sailings, introduced by carriers to manage capacity on specific trade routes, are disruptive. Usually, blank sailings lead to the rolling of containers to another vessel resulting in tons of additional accounting on the side of a forwarder, let alone potential delays and disruptions in the supply chain. The data on blank sailings, as well as on containers that are not shipped as booked, is important to have more visibility on rolled shipments."

Finally, the dwelling time of containers inside the terminal during export has increased substantially during the recent years. Meanwhile, for the merchant, the demurrage-free time has decreased dramatically, leaving a very small window for the delivery of export containers to the terminal in time for vessel cut-off and free demurrage. In this respect, CLECAT urges authorities in the European Union to consider the recommendations of the ITF in view of the distress in the freight forwarding industry, about the lack of cooperation and transparency and shipping lines reducing the free-time periods for the pick-up/return of containers and charging unreasonable detention and demurrage (D&D) fees.

During the crisis CLECAT has noted that it is unacceptable and unreasonable to charge unilaterally imposed damages (such as demurrage & detention) when the carrier itself is the cause of the delay because of the change of arrival time or delays in ship calls, changes in Yard opening times, etc. As confirmed by the ITF, charging unreasonable amounts of D&D should not constitute a revenue model for the shipping lines.