“If you do remove this as a tool for the shipping lines to use, are you prepared to accept higher freight rates as a consequence?” asked analyst Tan Hua Joo.
Speakers at the TOC Asia Container Supply Chain Conference in Singapore this week claimed removing the block exemption regulation (BER) would yield no benefits to cargo owners.
“All the stakeholders are pissed off with the shipping lines on everything — reliability, blank sailings and how they cooperate together in alliances,” said Alan Murphy (pictured above), chief executive officer of Sea-Intelligence. “Now the EU Commission has given those stakeholders a club to beat the shipping lines with — that the BER should be lifted.
“But I don’t think they actually want that. I think that would result in a poorer situation for most of the shippers,” Murphy said.
The BER, the de facto legislation covering liner alliances and vessel-sharing agreements (VSAs) on container trades to and from Europe, is set to expire April 25, 2020.
Murphy said alliances and VSAs have led to high cost savings for carriers, “which they’ve obviously not retained because they haven’t made any money. They’ve passed the savings onto the shippers, and the consequences have been lower freight rates.”
He said if the EU Commission does remove the regulation, VSAs will not become illegal but would be more difficult and costly to implement because of additional reporting requirements. As a result, larger carriers likely would continue with VSAs, while smaller players would find it more difficult, according to Murphy.
Thomas Elling, Hapag-Lloyd’s head of sales and customer service, agreed that lifting the BER would not affect carriers’ ability to share vessels or space.
“That will certainly continue in any case,” Elling said. “I also don’t necessarily see any per se breakup of the different alliances as you see them today. That scenario might change if there’s another acquisition or merger, but at this point in time that’s also not so likely.”
Alphaliner chief analyst Tan Hua Joo said shippers should be “careful what they wish for.”
“It is unclear on the part of the regulators, as well as the shippers right now, exactly what is the outcome they desire,” he said, claiming alliances are “the single largest driver of the very low freight rates in the market.”
“If you do remove this as a tool for the shipping lines to use, are you prepared to accept higher freight rates as a consequence, which is the most likely result of taking away this exemption,” he said.