Europe’s Shippers Keep Pressure on Carriers and Regulators

Europe’s Shippers Keep Pressure on Carriers and Regulators

When the European Shippers’ Council celebrates its 50th anniversary in June, carriers in the air and at sea undoubtedly will be reminded of two of the ESC’s biggest victories: its role in persuading European Commission antitrust hawks to outlaw liner shipping conferences, and forcing UPS to pull its $7 billion takeover of TNT Express.

But more mundane issues — the reduction in single-wagon-load rail services and the International Maritime Organization’s push for mandatory weighing of ocean containers, for example — are just as important, and of more immediate concern, to the shipper group’s members.

Both developments will increase supply chain costs at a time when European shippers — from large multinationals to small family run companies — face thinning margins and falling demand in a continent mired in recession while most other regions of the world have returned to growth. 

The decision by French, Italian and German rail operators to accelerate the withdrawal of single-wagon services that consolidate freight consignments will lead to factory closures, ESC Secretary General Paola Lancellotti warned. “It’s a question of survival for some small and medium-sized companies,” he said. The ESC disputes the operators’ claim that deregulation is making these unprofitable services even less viable.

The Brussels-based ESC also challenges the IMO’s stance that weighing a container before loading it on a ship will reduce incidents of boxes falling overboard. “Boxes falling off ships have very little to do with weight but how they are stowed,” Lancellotti said.

Lancellotti also expresses concern over the slow pace of rail freight liberalization, “which exists on paper but not in practice in most EU countries,” because of government protection of state-owned national railroads and opposition from labor unions. The U.K., Sweden and the Netherlands remain the only countries with truly open domestic and cross-border rail sectors more than six years after pan-European deregulation, she said.  

Shippers are paying the price for the slow pace of harmonization of technical and safety standards of the European Union’s 27 national rail systems, largely because of political opposition. Freight cars are forced to wait for hours, and sometimes days, at cross-border stations to be hooked up to a different locomotive to continue their journey on a “foreign” rail track. The result, according to Lancellotti, is rail risks “being deleted from the European supply chain.

“There’s no single market in trucking either,” she said. Some countries allow trucks of up to 44 tons — the EU’s upper limit — on their roads, while others have set a 42-ton limit. Portugal, meanwhile, permits 60-ton trucks to operate in areas close to its ports. 

A major reason for the failure to create a genuine single transportation market, according to the ESC, is that the EU’s agenda is largely determined by the producers — the ocean carriers, airlines and railroads — while the views of consumers — the shippers — are often overlooked.

“There is a lack of focus in the way we organize our transport industries,” Lancellotti said. “We forget that freight transport is there to serve European industry.”

Read about the JOC’s Top 100 U.S. exporters

Read about the JOC’s Top 100 U.S. importers

Meanwhile, the ESC continues to torment ocean carriers just as it did before liner conferences were abolished in late 2010. It has complained to European competition regulators about the near simultaneous announcements of general rate increases and sailing cancellations by individual carriers, particularly in the Europe-Asia trades. “This does not happen in other businesses,” Lancellotti said. “The big players are moving in the same direction at the same time.”

Shippers are getting a good price on the trade at the moment, with westbound spot rates to northern Europe tumbling to just $1,534 per 40-foot container on May 9 from $2,200 in just five weeks, in response to a yawning gap between supply and demand that’s unleashed an all-out rate war. “But for how long,” Lancellotti asks, will rates remain at current low levels?

Shippers applaud the European Commission’s success in battling anti-competitive behavior on air, land and sea. In recent years, it has fined 11 airlines approximately $1.1 billion for their role in a price-fixing cargo cartel and hit 13 top logistics companies with $225 million of penalties for rigging surcharges. Regulators also are investigating suspected price and capacity fixing by ocean carriers, following raids on their European offices two years ago.

The ESC isn’t just fixated on freight rates, however. Shippers also are urging action on service standards that can have an even greater impact on their supply chain costs. “The real reliability issue ... is door-to-door” delivery, said Marco Wiesehahn, a member of the ESC’s Maritime Transport Council.” This is where we find almost 30 percent of boxes do not arrive on time.”

Shippers also complain about artificially created capacity shortages, varying transit times and short notice of service changes.  

The ESC is increasingly concerned that Europe’s sovereign debt crisis will further delay critical transborder transportation projects as cash-strapped governments focus on funding on domestic projects. At risk is a high-speed Franco-Italian rail link between Lyon and Turin, one of Europe’s busiest trucking routes, that has stalled in the planning pipeline for more than a decade. The timetable for a $6.5 billion canal linking Paris to an inland waterway network connecting the giant ports of Antwerp and Rotterdam to the European hinterland also faces delay.

With such broad needs, it’s not easy getting the attention of policymakers in a city that vies with Washington, D.C., as the lobbying capital of the world. “Everyone here is fighting for their own piece of visibility,” said Lancellotti, who will celebrate her first year in the job in June.

It doesn’t help that the powerful and energetic U.K. and German shippers organizations prefer to act independently or that some shippers bodies are inactive — or that the U.K.-based Global Shipper Forum, which established in 2006, is pitching to represent European shippers on the international stage.

But “we are out there,” Lancellotti said. “We are listened to in Brussels.”

Contact Bruce Barnard at