What’s good for carriers of little benefit for BCOs, shippers say

What’s good for carriers of little benefit for BCOs, shippers say

Carriers and shippers disagree about the merits of shipping alliances.

Shippers are seeing little improvement in service levels from the new container shipping alliances that were launched on April 1, even as most global carriers bank a profitable first half and are looking forward to a solid year.

It is less than six months since the alliances began operations, and shipper organizations on Asia-Europe and the trans-Pacific trades have complained that the fewer direct services, reduced port calls, mega-ships, and blanked sailings are impacting their members.

European Shippers’ Council (ESC) maritime policy manager Fabien Becquelin said the ESC was not against alliances or any form of cooperation as such. “We just want to be sure it is done to the profit of the customer, to the profit of the cargo, and the logistics chain as a whole,” he told JOC.com.

Carriers argue the alliances provide shippers with greater reach and frequency, and are critical to mitigating overcapacity.

“Until now concentration and alliances have not been to the profit of the customers with a lot of reduction in calls in each port, in the number of ports calls around Europe. Of course, some ports win with more calls from alliances, but on a larger scale at a European level, the balance is negative. Increased size of ships has only led to congestion at ports and spikes in activity, which is not good for the fluidity of the supply chain.”

Peter Friedmann of the Agriculture Transportation Coalition said the delivery of the mega-ships did not address the critical factors impacting the shippers.

“Thus far, at least in the North America trades, while the alliances appear to be maintaining overall capacity, the number of sailings and direct routes have been reduced,” he said. “This is already impacting US agricultural exporters by concentrating cargo, causing more congestion at the terminals, fewer options to deliver time sensitive agriculture exports such as chilled protein, fewer options for US exporters to meet foreign consignee delivery requirements, additional handling and delay at foreign trans-shipment locations, etc.”

Friedmann was responding to an article in JOC.com regarding the huge amount of mega-ships that will be delivered over the next two years. IHS Markit data show the bulk of deliveries are due before 2019, and they are heavily skewed at the top end of the range with 18,000-plus-TEU ships that have very limited deployment options accounting for around 40 percent of the orders. Seventeen vessels amounting to 350,000 TEU are set to be delivered this year, and another 22 mega-ships are scheduled for delivery in 2018.

Friedmann said the downside of the mega-ships should be addressed. “The impacts on trade are more complex to calculate than a simple addition of TEU to arrive at overall carrier capacity,” he said. “To the shipper, overall capacity is not the only issue, rather, the most concerning issue is how this is being accomplished, and most importantly, the impact on the cargo.”

The majority of the mega-ship capacity would be deployed on Asia-Europe and analyst SeaIntel noted in a recent newsletter that this would lead to canceled services and blanked sailings, a scenario Becquelin said was “clearly not reassuring.”

“We have experienced in the past that each and every round of consolidation or modification in alliances was not in favor of shippers,” he told JOC.com, with the severe space shortages experienced in Europe after the alliances began still very much in the minds of ESC members.

Contact Greg Knowler at greg.knowler@ihsmarkit.com and follow him on Twitter: @greg_knowler.