EU’s anti-trust action may not end Alliances

With the European Union’s surprise decision to end container shipping lines’ exemption from competition law in April next year, and imposing carbon taxes on them from January, European container shipping may have a challenging 2024.

The abolition of the Consortia Block Exemption Regulation (CBER) does not necessarily mean the end of container shipping alliances, however, while there may be no operational impact, it does mean that carriers will need to review their situation carefully, to ensure they are compliant with new rules.

The European Commission (EC) has stipulated that the expiry of the CBER does not mean that consortia are prohibited in the European Union (EU), but it does mean that they are subject to antitrust rules that apply to all other economic sectors.

The carriers will need to re-assess, not only the alliances but also other vessel-sharing agreements (VSAs) to/from Europe. The working document underlying the decision from the EU identifies a total of 43 consortia falling under the CBER.

While cooperation between carriers is still possible as long as it is compliant with general competition rules, carriers may be put off from collaborating if they risk exposing themselves to potential legal action.

The subsequent risk of the EU’s decision is that it encourages the lines to operate independently – which will be accelerated if other jurisdictions follow the EU’s lead. This may ultimately lead to carriers downsizing service portfolios, frequency, and connectivity, thus reducing competition and pushing up freight rates.

EU-ETS surcharge

The EU’s emissions trading system (ETS) will apply to shipping from 1st January, with carriers beginning to announce ETS-related surcharges from the first quarter of 2024.

With shipping lines setting the surcharge a year before they have to pay for their emissions, it is impossible to get any meaningful transparency on how surcharge figures are arrived at.

Maersk and Hapag-Lloyd have shared their initial ETS surcharge indications, with Maersk proposing 70 EUR/FFE for shipments from Asia to Northern Europe, while Hapag-Lloyd has a far lower figure of 24 EUR/FFE.

The disparity in their figures suggests they are either based on guesswork or an estimate which may, or may not, in any way reflect the actual cost to be paid by the lines in September 2025.

Carrier options for 2024

Despite vocal complaints, there appears to be no compelling evidence that container shipping lines, and by extension their alliances, abused market power during the pandemic.

In fact, the impact of COVID on supply chains seems to indicate that freight rates soared simply because of sustained and constrained supply and demand dynamics.

That simple dynamic will continue to define the container shipping lines’ fortunes (or lack of) in 2024, as what ultimately happens during the year will be entirely in their hands and their supply/demand decisions.

One of the potential outcomes could see the largest carriers starting a rate competition to drive weaker carriers out of the market, but given the amount of market share gained, would it really justify the costs involved?

Those are the tactics that could wipe out carrier profits and leave the industry in the same, mostly unprofitable, position that it was in prior to the pandemic.

Looking forward to 2024, the trade press expect more blank sailings, slow steaming, delayed vessel deliveries, routing around the Cape of Good Hope to save Suez Canal fees and absorb capacity and increased scrapping.

Noatum Logistics, part of Noatum Group which leads AD Ports Group’s Logistics Cluster, leverages opportunities for our customers across all three of the shipping alliances (2M, THEA and Ocean Alliance) with individual carrier relationships that are long established and built on personal connections from operations to senior management and executive level.

These relationships already give our customers access to the widest range of service offerings which are maintained irrespective of how the container shipping sector evolves in the coming months.

We will stay close to this topic as it develops, and ensure that you are kept up to date with the most important news. If you have any questions or concerns please EMAIL Matt Fullard, Business Development Director – North Europe.