The British International Freight Association (BIFA) has asked the U.K. government to investigate the state of competition within the current ocean container shipping market amid recent consolidation in the sector alongside record profits for ocean carriers.
BIFA, the U.K.’s top trade association for freight forwarding and logistics companies, says that its members are concerned that certain practices undertaken by the principal container shipping lines, as well as easements and exemptions provided to them under competition law, are distorting the operations of the free market to the detriment of international trade.
In a letter to Robert Courts MP, the Parliamentary Under Secretary of State at the U.K.’s Department for Transport, BIFA director general Robert Keen expresses the trade association’s concern that commercial power is becoming increasingly concentrated within the container shipping sector amid the global supply chain constraints, resulting in diminished market choice and competition, and distorted market conditions.
“BIFA members fully accept that a free market economy is open to all, but are increasingly concerned that the activities of the container shipping lines, and the exemptions from legislation from which they benefit, are distorting the operations of that market to the shipping lines’ advantage, whilst adversely and unfairly affecting their customers, especially freight forwarders and SME businesses,” Keen wrote in the letter.
Keen specifically pointed out that there were 27 major container shipping lines carrying cargo in 2015, with the largest line holding a 15.3 percent market share of global container trade. Now, there are 15 shipping lines that have organized into three major alliances (2M, Ocean Alliance and THE Alliance) since 2017. Analysts have observed that the market share of a single alliance on certain key routes could be over 40 percent, he said.
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“The pandemic has highlighted and accelerated this development, which has also contributed to dreadful service levels, and hugely inflated rates, with carriers allocating vessels to the most profitable routes with little regard to the needs of their customers,” Keen said. “Drewry recently issued a profit forecast of more than $150 billion for 2021 for the main container shipping lines for which financial results are available. To put that into perspective, this is more than has been achieved in the previous 20 years combined, which many BIFA members consider to be a case of blatant profiteering.”
Whether the ocean freight giants deserve criticism for profiting off the current supply chain scenario or not, their record numbers leave little room for debat. AP Moller Maersk took in $5.4 billion in profit for 2021’s third quarter, up from just $1 billion year over year. France’s CMA CGM reported $5.6 billion in quarterly net income, up from $567 million profit in 2020’s comparable quarter, while China’s Cosco Shipping Holdings brought in $4.8 billion, up from the prior year’s $3.4 billion.
BIFA is joining organizations such as CLECAT (European Association for Forwarding, Transport, Logistics and Customs Services), FIATA (International Federation of Freight Forwarders Associations), the U.S. Federal Maritime Commission (FMC), and the Australian Productivity Commission, in calling for governments at a national and pan-national level to further consider how actions within the evolving container shipping market might breach competition law.
West Coast ports delay container dwell fees again
While the fight against potential anticompetitive behavior at sea is a worldwide affair, ports in the U.S. continue to monitor the current scenario to determine whether it is necessary to fine carriers when shipments remain idle at the ports for an extended time.
On Monday, the West Coast Ports of Long Angeles and Long Beach decided to yet again delay implementing $100-per-day container dwell fees for another week, when executive directors at both ports will revisit the matter on Jan. 10.
This is the ninth time stakeholders decided to put off the fines.
Since the program was first announced on Oct. 25, the two ports have seen a combined decline of 35 percent in aging cargo clogging up the docks. As expected, year-end holidays have slowed the progress compared to previous weeks.
Under the temporary policy approved Oct. 29 by the Harbor Commissions of both ports, ocean carriers can be charged for each import container that falls into one of two categories: In the case of containers scheduled to move by truck, ocean carriers could be charged for every container dwelling nine days or more. For containers moving by rail, ocean carriers could be charged if a container has dwelled for six days or more. Currently, no date has been set to start the count with respect to container dwell time.
The ports plan to charge ocean carriers in these two categories $100 per container, increasing in $100 increments per container per day until the container leaves the terminal. The program is designed to incentivize shippers to quickly clear their cargo from the docks and eliminate the pileups seen in recent months.
Before the pandemic-induced import surge began in mid-2020, on average, containers for local delivery remained on container terminals under four days, while containers destined for trains dwelled less than two days. Those dwell times averaged nine days in November and were weeks-long at points throughout the year.
The policy was developed in coordination with the Biden-Harris Supply Chain Disruptions Task Force, U.S. Department of Transportation (USDOT) and multiple supply chain stakeholders.
NY/NJ ports continue record cargo movement
While much of the attention has gone to the two West Coast ports and their handling of the perpetual backlogs, the Port of New York and New Jersey continues to deal with its own record cargo volume.
The Port of New York and New Jersey moved 759,390 20-foot container equivalent units (TEUs) in November 2021, which was the 16th month in the row of record-setting cargo shipments.
The month’s cargo volume was up nearly 27 percent from pre-pandemic levels of November 2019, and 2.8 percent more than 2020. While November 2021 hit a record for any month of November at the port, cargo activity was down by 4.7 percent compared to the month prior, when the seaport hit an all-time record high for monthly cargo volume.