US pre-strikes sky-high freight rates! Liner company insists on Biden "do not understand shipping"
US President Joe Biden will sign a new executive order, which, among other things, will require US regulators to take more measures to promote maritime competition. The shipping alliance controls more than 80% of the market. Specifically, the order will encourage the Federal Maritime Commission to impose compulsory measures against shippers charging excessive fees to US exporters, focusing on the high cost of waiting to load and unload cargo.
The response came. Liner operators headed by Maersk and Hapag-Lloyd are fighting back against the administrative actions taken by US President Biden to reduce shipping costs.
The World Shipping Council (WSC) warned that legislative action would make things worse. Shipping companies have "doing their best" to deal with the extreme logistics time of supply chain disruption caused by Covid-19, but unfortunately the epidemic has hindered ship berthing and cargo unloading.
The Danish giant Maersk stated that the "perfect storm" caused by the epidemic resulted in "the interaction of many factors beyond the control of any one stakeholder."
Hapag-Lloyd said: "Any legislative action should be aimed at alleviating infrastructure problems, not on the action itself.
Fierce competition in the liner industry
WSC stated that competition in the liner industry is still very fierce and added that lack of competition is not the cause of cargo congestion. According to the latest report of WSC, new liner companies have entered the market, and ship orders in the first half of the year have exceeded the sum of 2019 and 2020.
John Butle, President and CEO of WSC, said: “There is no market concentration problem that needs to be'solved'. Taking punitive measures against liner companies based on incorrect economic assumptions will simply not solve the problem of port congestion.”
"Only by restoring normalized demand and solving the operational challenges related to overcoming the epidemic can the bottleneck problem in the supply chain be solved."
BOX Club has been disbanded
High freight rates have made liner companies increasingly sensitive to regulatory threats from regulatory agencies in the United States, Europe, and China. The liner operator revealed that the well-known shipping industry organization "Box Club", which has existed for 50 years, has been disbanded.
The official registered name of BoxClub is the International Council of Containership Operators (International Council of Containership Operators), which mainly provides a private meeting place for the heads of the world's top container liner companies. The "practice" of holding business and social gatherings twice a year seems increasingly outdated under the supervision of competition regulators.
Maersk CEO Soren Skou, who served as the chairman of the agency from 2014 to 2020, said that BOX Club “played an inestimable role in the history of the industry” and shipping companies must “continue to transform existing The liner shipping industry is organized to meet the increasingly accelerating commercial and regulatory challenges in the future."
Unprecedented market conditions
In a market where freight rates have risen to unprecedented levels, shipping companies have become increasingly defensive against regulators.
According to the Baltic Freight Index (FBX), the freight rates from Asia to the East Coast of the United States are particularly strong. Last Friday, the price rose by nearly US$700 to US$11,045/FEU, an increase of more than 200% over the same period last year. The freight rate from Asia to the West Coast of the United States dropped by US$500 to US$6,046/FEU, but it was still nearly 151% higher than the same period last year.
As the shipping industry enters the peak season, the shipping company’s situation may deteriorate further in the next few weeks, but the representative of the liner company said that they cannot be blamed. This is related to "we are dealing with the market disorder brought about by the epidemic and the resulting change in American consumption patterns."
And said: "These events have had a real negative impact on the entire supply chain. Like everyone else, we are eager to return to a more predictable market."
"During this period, we urge everyone to make decisions based on the actual situation, otherwise we will deal with temporary situations through poorly considered regulatory reforms, which will cause long-term negative results," John Butle concluded.
Commercialization of Shipping
The liner shipping industry is increasingly concentrated, and the current three major shipping alliances are: THE Alliance, Ocean Alliance and 2M Alliance. But Doug Morgante, vice president of US Government Relations at Maersk, said that this system creates a flexible solution in the current environment, which is beneficial to shippers.
"We find ourselves in this position as a result of shipping commoditization, which has also led to market volatility that is not in the interests of anyone," DougMorgante added, "only through real partnerships-including regulators and policy makers Only then can we make progress towards a more stable and efficient port ecosystem."
Hapag-Lloyd said that this situation is due to "the huge demand from American customers and the shortage of land infrastructure."
A spokesperson said: "If regulations are intended, they should aim to alleviate infrastructure problems."
