From SCDigest's On-Target e-Magazine
- Nov. 26, 2013 -
Global Logistics News: Even as Rates Tank Again, European Commission Looking at Whether Container Carriers are Illegally Signaling Prices
Timing and Level of GRI Announcements are Amazingly Similar Across Euro Carriers, Alphaliner Finds
SCDigest Editorial Staff
The lot of the ocean container carrier has in general not been an easy one for several years, with rates generally in the tank, as new capacity keeps coming into the industry while in general demand for container movements have fallen sharply from the go-go days before the great recession of 2008.
Back then, global trade grew substantially faster than world GD P growth. Lately, container volumes have been flat or even a bit below GDP growth, even as a continuous stream of new megaships are delivered to the carriers, a pattern that will continue in 2014 and beyond. (See Continuing Good News for Ocean Shippers, as Container Lines Just Can't Bring Capacity Down.)
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As can be seen, the timing and size of the planned general rate increases appear almost identical across Hapag-Lloyd, MSC, and Maersk Line.
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That of course has pounded container rates, which have sometimes dropped close to or even below variable costs to run the ships, though rates bounce up and down both seasonally and due to market dynamics. But in general, carriers have found it tough to execute planned rate increases, which often hold for a short while and then slide back again.
That was certainly the case in Q3, normally a strong shipping season. Last quarter, Maersk Lines, the world's largest container carrier, said rates dropped by 12.2% over Q3 of 2012.
That scenario was true with most others as well. Rate changes in Q3 for some other major carriers were:
• CMA CGM:-11.8%
• Hapag-Lloyd: -10.4%
• OOCL: -9.4%
• MOL: -9.9%
• K Line:-9.6%
• APL: -8.8%
In this generally lousy pricing environment, the carriers may be wondering why the European Commission has recently announced it is investigation container shippers for antitrust violations relative to price signaling.
The EC is looking at whether many carriers engaged in what it said were "concerted practices" that violate EU antitrust laws. According to the EC, the carriers have been making regular public announcements of their intentions to increase prices through press releases on their websites and in the trade media since 2009, which "may harm competition and customers by raising prices" on routes in and out of Europe.
Whether the fact that many of these announced price increases have not held up under the force of the market may or may not be considered relevant by the regulators.
But the researchers over at Alphaliner have gone back and looked at many of these announcements since 2009 and found there are certainly, shall we say, some interesting patterns.
"Far East-Europe carriers have announced at least 34 rate increases since 2009. In most cases, the timing and quantum of the increase were largely similar for all the main carriers, with announcements made by carriers within a few days of each other," Alphaliner says. "Although carriers varied the amount of the rate increases by between $25 to $100 per TEU at certain dates, it could still come under the EC's ambiguous "concerted practices" rules as tacit collusion, which do not require an explicit agreement to fix prices."
(Global Supply Chain Article Continued Below)
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