More maritime regulatory reform is needed in Asia to protect shippers from collusion by lines, the Asian Shippers’ Council says.
Repeating its previous declarations that container carriers act as a “cartel,” an ASC statement issued after its 8th annual meeting this month said reform had gained added urgency because carriers were targeting Asia to boost profits.
“The cartels, while not visible, are active throughout the region,” the ASC said. “With no maritime regulatory oversight, they can operate with impunity, keeping rates and surcharges at unacceptable levels.”
In an interview after the meeting, Chairman John Lu told JOC that rates surged this year despite the global economy’s general weakness and excess vessel supply. This, he alleged, was evidence that the current global liner system led to higher costs for shippers and the inefficient balancing of shipping supply and demand.
“How,” he asked, “can business be bad but rates rise substantially? “The only way this can happen when shipping is in oversupply is if you have a cartel in place happy to push up freight rates irrespective of the business environment.
“The rate increases are so close to each other, they cancel services at the same time. When lines want more money they just make new surcharges. This is lines getting together to corner the market,” he said. “It is Asian shippers that are the victims of the cartels because they have to cope with higher costs and a tougher market. The so-called antitrust bodies in Asia just turn a blind eye.”
Asked if lines, after suffering terrible losses last year, had any option but to boost earnings by whatever means available, Lu said they should have to work to survive within a free market like their manufacturer customers.
“The liner industry’s problem is down to the nature of how they operate,” he said. “They make all this money when the market is good, then they buy more capacity. Then when they can’t react to trade changes fast enough, they have to work together to hold the price up. This will continue unless the cartel system is changed, and until then everyone has to suffer from the volatility that results.”
The ASC said carrier efforts to introduce more competitive practices had “run into strong headwinds” even in countries with strong competition laws such as Australia and Singapore that offer lines special dispensations. The council, however, welcomed the New Zealand Productivity Commission’s April recommendation that liner exemptions under the Commerce Act be repealed.
“We understand the (New Zealand) government has accepted the recommendation and is now investigating interim proposals to remove antitrust immunity for liner conferences,” the ASC said. “Together with the Global Shippers’ Forum, we are extending our fullest support to the New Zealand Shippers’ Council and the New Zealand government to work towards this end. We believe New Zealand’s decision would have far-reaching consequences, creating pressure for reform elsewhere in the region.”
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