Rein in cartel with antitrust law, says Lu

Asian and global shippers, the manufacturers and product suppliers that stock the world's store shelves, are midway through a three-day annual meeting seeking ways to rein in the container shipping lines that transport goods to the world's stores.

Some heavy hitters are present, reported the South China Morning Post, including United States Federal Maritime Commission chairman Richard Lidinsky and Hubert de Broca, the deputy head of the European Commission's transport antitrust unit. But it is possible shippers will be leaving empty-handed.

Shippers and container lines have been at loggerheads for years. Initially, the main issue dividing the two sides was terminal handling charges. Despite the name, these are the fees levied by container lines on shippers to get their cargo loaded aboard a ship.

Now, the thorny issue separating the two is the cartel that the Asian Shippers' Council claims operates among container lines on major trade lanes, especially transpacific routes to North America from Asia.

Council chairman John Lu said container lines had been able to push through significant increases in the cost of transporting a 20 or 40-foot container while also adding surcharges on top of these general price rises. These surcharges cover various items including rising fuel prices and the cost of repositioning empty containers from Europe or North America to Asia.

Lu has been particularly scathing about the tactics of the 15 carriers belonging to the Transpacific Stabilisation Agreement. Together, they transport about 85 per cent of the total containerised goods across the Pacific Ocean. These include major lines such as Orient Overseas Container Lines, Cosco Container Lines, CMA CGM, Maersk Line and Hyundai Merchant Marine.

Standard container shipping rates on some services have increased about 300 per cent to almost US$3,000 per 40-foot container, while some shipping lines have imposed a peak-season fee and other surcharges.

Lu said manufacturers and suppliers had little choice but to pass on these extra costs to consumers, who were paying higher prices for their everyday goods because of the action by shipping lines.

Justifying the higher rates, carriers said they were badly mauled by the global economic downturn with total collective losses among the top 20 leading carriers of about US$20 billion. With container shipping rates not even meeting operating costs on some routes last year, the goal this year has been to rebuild revenue growth to help secure cash for investment in new ships and services.

This was being achieved in the early part of this year by cutting capacity, laying up container ships and cutting the sailing speed of vessels from 24 knots to about 13 to 14 knots on some routes.

But Lu said these moves to manage capacity exacerbated the situation for manufacturers, creating a shortage of space. So shippers had to pay a surcharge to guarantee their cargo being loaded on to ships.

As a result, Lu said: "This time after the crisis, container lines are getting together much stronger than before and have managed to push up surcharges."
He said freight rates are "close to the peak before the crisis in 2008".

Lu added that most shippers were small and medium-sized manufacturers that had no option but to pay the higher rates and surcharges, otherwise their cargo was not loaded.

While the joint Asian Shippers' Council-Global Shippers' Forum meeting, which started yesterday and ends tomorrow, will discuss these issues, Lu said one of the main talking points would be the likely regulatory moves that could be taken to break up the Transpacific Stabilisation Agreement.

He said regulators in the US and Europe had disbanded similar agreements between carriers over the past two years and Asian shippers wanted similar action here.

He said that while Singapore and China looked as if they would end antitrust immunity for container carriers, nothing had yet been done.

"Chinese shippers are suffering the most because they have the largest number of shippers. Shippers in Asia are really at the mercy of government regulation, but as governments continue to turn a blind eye, then shippers continue to suffer. There is no way out," Lu said.

But Lu said the presence of North American and European regulators at the meeting in Macau this week might make governments in Asia sit up and take notice.
(Source:www.cargonewsasia.com)