A World Shipping Council study outlines benefits of vessel-sharing agreements as European regulators study whether to extend antitrust protections past April 2020.
The World Shipping Council (WSC), the primary trade organization for container carriers, says shipping consortia not only lower freight rates by allowing shipping companies to operate bigger ships, but also result in shipping companies passing on efficiencies to customers and improving the quality of their services.
“Vessel-sharing arrangements are essential tools for providing efficient, environmentally responsible and frequent liner shipping services to countries all over the globe,” said WSC.
The WSC made its remarks as it made public an 18-page report Consortia, pass-on and service quality, it has submitted to European regulators who are evaluating whether to extend antitrust protection, the so-called “consortia block exemption regulation” that allows liner shipping companies to cooperate with space-sharing agreements.
The current block exemption regulation expires on April 25, 2020, and regulators have invited comments as they decide whether to renew it.
The WSC report parries criticisms made by nine organizations representing shippers, freight intermediaries and transporters in a statement last month that called for repeal of the block exemption (BER) “unless a revised regulatory framework clarifying the current BER is adopted.”
The nine organizations — Global Shippers Forum, European Shippers Council, European Association for Forwarding Transport, Logistics and Customs Services (CECLAT), European Boatmen’s Association, European Barge Union, European Skippers Organization, European Tugowners Association, Federation of European Private Port Companies and Terminals and International Union for Road-Rail Combined Transport — complained about increasing market concentration and service quality.
They pointed to a report by the International Transport Forum of the Organization for Economic Co-operation and Development (ITF-OECD) from November titled The Impact of Alliances in Container Shipping that said, “The impacts of alliances on the containerized transport system taken as a whole seem to be predominantly negative.”
The three best-known consortia — the 2M, Ocean Alliance and THE Alliance — dominate the major east-west container trades, including those between Europe and Asia and Europe and North America, but there are consortia agreements to many parts of the world.
The WSC report was prepared by RBB Economics. Using data from Drewry Maritime Research, RBB examined global average revenue and operating costs per container from 2013 to 2018.
It found “carriers’ costs per TEU decreased substantially and shipping rates decreased in similar proportions. The close correlation between rates and costs shows that shippers benefit from reductions in operating costs in the form of lower overall freight rates (including surcharges).”
Another part of the RBB report used the “liner connectivity index” developed by the U.N.’s Conference on Trade and Development (UNCTAD), which shows how integrated individual countries are to liner shipping networks. RBB concluded that between 2013 and 2018, “the formation of larger consortia and mergers and acquisitions in the industry have not reduced connectivity. On the contrary, it has increased overall.”
Absent consortia, carriers would have to reduce service frequencies in order to maintain utilization of their ships or replace ships with smaller vessels, which would be both a costly and a lengthy process, the report says.
The final part of the report focuses on services between Asia and North Europe.
WSC says Drewry data demonstrates “the industry has increased capacity and has retained or expanded service coverage between countries in Asia and countries in the EU.”
“For example, in 2013, these services provided direct calls to 20 unique ports in 12 EU countries; by 2018, this had increased to 24 unique ports in 14 EU countries.”
WSC says the absence of consortia “would significantly reduce service quality compared to current levels.”