Widdows: Oberstar bill ?not the way to do this?

Widdows: Oberstar bill ænot the way to do thisÆ    APL Chief Executive Officer Ron Widdows called for a more 'considered approach' to the debate on ocean carrier's antitrust immunity.

Widdows

   Speaking at the annual conference of the American Import Shippers Association and the United States Association of Importers of Textiles and Apparel this week, Widdows complained about legislation introduced by ousted Congressman James Oberstar to change shipping regulation in the United States.
   “This was not the way to do this. A debate about antitrust immunity, rate discussion authority is a wonderful debate to have. The people who put this bill together in a way that would be damaging to your interest,” he told the group. “As this moves beyond the current Congress into the next Congress, and hopefully results in a more considered approach where all stakeholders can be engaged in the discussion, this moves to a better place. This was truly a bad piece of legislation.”
   Widdows contended in an interview after his speech that the bill would have resulted in “dismantling the ability of alliances to operate.”
   “As people become more familiar with that, there is a broader segment of people that understand that this was well intended, kind of went bad in the process of being developed. It didn’t involve all the stakeholders that are affected, and didn't have the kind of discussion that you would want to have if you are going to have major revision to the Shipping Act. So there is probably a way to advance the discussion on this, but the bill was not the way to do this.”
   He said the bill would have prevented discussion agreements in the transpacific trades, for example, from setting up shipper advisory councils as they have in the past year.
   “Don’t you want to have the shipping community broadly be able to engage and work issues? Forget about price. It’s about infrastructure. It’s about regulatory changes, and other things that affect shippers. It’s about service capabilities and how networks get built, and how carriers think about investing in capacity, how contracting is done, how things might change over time. How the industry coordinates its efforts broadly relative to the development of new customs and the like. Isn’t a good idea to have a group of carriers and group of shippers engage on those things? If you went to the extremity of what some have proposed you would not be able to do that. I think that is a bad thing. How you deal with price and setting price and price discussions, that is a different story.”
   Widdows also told the meeting of garment importers that they should prepare for a possible return to tightness in shipping capacity in several years.
   'Based on the bounce that we have seen, as well as what we have seen on the asset side, we are probably looking at something out around 2013 when not only is there a rebalancing of supply and demand, but probably a squeeze,” Widdows said.
   “One of the things that I would encourage you to do is to engage with your carrier of choice and be thinking about not just about the arrangements and relationships that you establish next year, but how you think about your business over the next few years, when not very far down the road the likelihood is there is not going to be nearly enough tonnage to satisfy demand, even at moderated demand growth. There are just very few people ordering ships.
   “Ship financing is still largely locked up. The KGs are largely out of business. The Germans who built a lot of ships are largely not buying ships. There are no ships being bought on speculation, That is going to have the effect of tightening the supply side,” he said.
   A kommanditgesellschaft or “KG” is German limited partnerships. They were widely used to finance containership construction in the past, but according to Widdows, “that scheme for raising financing is effectively gone.”
   “Think about that as you engage with your carriers. What is it you can do to position that they can better take care of you down the road,” he said.
   Shorter term, Widdows predicts “capacity next year will be adequate, some squeezes in the peaks, maybe. But there is enough capacity in the world to meet the demand based on the growth we are projecting.”
   Widdows also told shippers that slow steaming is likely here to stay.
   “I know in this room those are kind of dirty words. This is a horrible thing. But the economics make it so and it will remain so for quite some time. At almost $500 a ton for fuel today, the likelihood that it moves up from here, the pressure to continue to conserve, reduce fuel cost, and ultimately reduce emissions is going to be there,” he said. He said slow steaming would be less attractive on the transpacific to U.S.-flag operators.
   Some shippers faced difficulties getting containers in 2009-2010, and Widdows told the conference that container manufacturers have begun to increase production. While production is still not at the level needed by the shipping industry, he told conference participants that in 2011 they will “probably face less problems with containers. That presumes that leasing companies and carriers are going to pay historic high asset prices.” He said the price of 20-foot containers has climbed to $2,700 from about $1,500.
   “One has to think carefully about investing in the asset at that price because you now have it for the next decade,” he said. “That may temper the enthusiasm for building boxes.”
   Widdows also emphasized that growing trade within Asia is creating a big demand for containers.
   The outlook will be tougher for exporters. He said there are going to be “screaming guys in North Dakota, and they are going to be screaming because they can’t get containers. The containers are where the people are, they are not where the stuff is. The time and the cost to get it there will cause some difficulties in supplying export activities.” ' Chris Dupin