The European Shippers’ Council (ESC) said it was asked by representatives of national shippers’ councils, as well as by individual export companies, to organize an emergency meeting, adding: “This meeting took place last week and focused on the current situation in the maritime sector: goods to be exported have been waiting for up to eight weeks to be loaded on ships. The present capacity is insufficient to take all shipments.”
ESC said carriers were also providing no guarantee that all of the goods within a shipment would be loaded, noting: “Frequently some goods from a shipment remain in the port. At the same time spot market freight tariffs are increasing.”
The cargo-owner representative body continued: “These developments are forcing many traders to cancel their existing sales contracts and limit further sales. For ESC, this is a reason to worry about European exports and the negative consequences for the competitiveness of European economy.”
ESC questioned whether the present situation was a natural result of the market adjusting to capacity changes in the maritime sector, “or is it an artificially created scenario by certain shipping lines, to increase their profitability”? It also questioned how long the current problem would last. But the organisation acknowledged that its emergency meeting was unable to provide instant answers to the problems.
It said the first signals of a market disturbance were already perceived last November with an increase of blank sailings. And it highlighted that no shipper had been invited to discuss the present market situation, or consulted in any way about the balance between shipments and capacity.
Following the ESC emergency meeting, the ESC board of directors decided to set up a temporary observer group composed of representatives of European exporters to monitor closely the situation. “They will analyse the changes in capacity, the time of delays, and the fluctuation of rates,” the ESC said. “The data collected will be used to decide on possible next steps.
“ESC will be regularly informing press and competent authorities of intermediate and final results of this exercise. ESC will meet DG Competition in the early summer to give them an informed view on the present crisis and discuss strategies to prevent this from happening again in future.”
Lloyd’s Loading List has reported several times since early March that European exporters have been experiencing problems securing eastbound ocean freight capacity, disrupting their supply chains. European shippers who export goods to Asia have reported a large drop of available slots for containers on almost every shipping line.
ESC has reported that its members have faced issues including breaching of contractual commitments by some liners to difficulties getting boarding slots before May and fluctuating freight rates, including hikes up to 45% to firm up a booking. This was translating into missed sales, stock failure, and significant extra costs as some exporters are trying to circumvent these obstacles by using other modes.
The shipper body said it had been warning stakeholders for some time that some problems might occur after Chinese New Year because of sailing cancellations. But it said the magnitude of the turmoil was completely unexpected, given the background of continuing structural overcapacity of the market.
The ESC called for carriers to take their responsibility and give an accurate account of the present situation and of its causes, while making sure that everything goes back to normal. ESC was also drawing the attention of the regulation authorities to the current market structure, “where three major alliances control close to 90% of the capacity on the major trades”.
ESC stressed that it was not accusing lines of breaching antitrust rules, but indicated that it believes the current competitive market is unhealthy and unsustainable. “Despite carriers not violating any present regional regulation on competition, the combination of a high concentration of players and a recurrent instability within the alliances induces a much higher risk of making this kind of market disruption frequent and significant,” ESC said.
ESC said shippers’ representatives had already called for “and call once more for the maritime industry to initiate a constructive dialogue with them and other stakeholders. The objective of such a dialogue would be to create the framework for a sustainable market where the liners’ offers would meet the shippers’ expectations of service quality, continuity and predictability.”
As reported last month in Lloyd’s Loading List, freight forwarders are having to find creative solutions in response to the current eastbound ocean freight capacity shortage between northern Europe and Asia, with the current low draft on the river Elbe compounding the situation by restricting the capacity of vessels operating in and of the port of Hamburg.
Forwarder Panalpina said the main cause of the eastbound shipping capacity shortage had been the number of blank westbound sailings post-Chinese New Year. And although carriers had been honouring the company’s contracted allocations, forwarders and shippers have been facing backlogs for several weeks for non-contracted capacity.
It said there were currently major capacity constraints on all ocean carriers from Europe to Asia, and outside of contracted capacity, it is extremely difficult to procure space at short notice – a situation expected to continue well into April. In the meantime, Panalpina was offering alternative routings to shippers via southern European ports as well as rail freight alternatives into China.
As reported several times last month in Lloyd’s Loading List, the shortage of eastbound Europe-Asia ocean freight capacity in recent weeks has led to a demand surge and a significant hike in air freight rates on eastbound routes from Europe to the Asia Pacific region, as forwarders and shippers divert urgent shipments from sea freight to air freight transport. These rate increases are mainly to east Asian markets such as Korea, Japan, and China.
Shipping lines including Maersk and Mediterranean Shipping Company (MSC) have said demand for space for cargo going east of Suez has been extremely strong, and this, in combination with a number of sailings omissions as a result of the Chinese New Year slowdown, had resulted in a high level of requests and bookings.
Maersk also confirmed that in addition to service cuts post-Chinese New Year, there had been an increase in eastbound demand, driven by several factors including domestic policies in China stimulating demand and hence requiring raw materials such as like chemicals, wood, paper and recyclables; a decline in Asian imports from Europe for the last 12-18 months now requiring re-stocking; and strong demand continuing in areas like food and beverages – commodities such as meat, milk powder and alcoholic drinks.