The expression "war economy" is coming back in force in European political rhetoric. Turning words into actions would have a real impact on containerised shipping.
"How to refer to a "war economy" without being at war yourself ?", headlined the newspaper Le Monde in an article of January 10, 2024 (article in French) recalling that the term had first appeared in 1914. It was then a question of "redirecting raw materials, industrial production, but also food and textile, logistics, taxation, investment and savings to the sole needs of the army. Even if it means rationing civilian consumption without sacrificing basic needs," says Le Monde.
In June 2022, the President of the Republic, Emmanuel Macron, announced that France had entered a war economy following Russia's invasion of Ukraine, without any visible impact on the country's "civilian" economy. The subject is now back in the spotlight, as tensions increase with Russia.
If the transition to a real "war economy" concerns in particular the defence industries, called upon to mobilise their capabilities, it would also have a strong impact on the world of containerised maritime transport.
Hybrid war, economic war, cyber war, there is no shortage of terms to describe this type of so-called "modern" war that seems to be spreading across the European continent with a worrying inevitability.
1/ From the shipping companies' perspective
The shift to a war economy would have very concrete impacts for shipping companies.
- Requisition of part of the merchant fleet by a State which pays the charters at a rate higher than the operator's costs.
- An integration of military personnel into the company's chain of command.
- The use of merchant ships to transport military goods (projection capabilities).
- The use of merchant ships for military purposes (camouflaged firing platforms, intelligence, etc.).
- A State guarantee on predefined values in the event of total destruction of the vessel under a State charter contract.
2/ From the shippers' perspective
The main issue for shippers would be whether or not they can continue to trade internationally in times of war with countries that are in principal friends... but not only them. The Russian-Ukrainian conflict brings this point into perspective. Despite the sanctions, Russian oil has continued to flow and reach Europe, even though Westerners seem to be starting to react. In February, the United States sanctioned 14 tankers of a "phantom fleet" used by Moscow to evade the price cap imposed by Western countries. The Ukrainian wheat trade also continued.
A situation of war and international maritime trade are therefore not two incompatible concepts, but this requires a more restrictive framework, more controlled and necessarily regulated by the sovereign authorities for the basic necessities to be imported. As such, the experience of the Covid-19 pandemic has had beneficial effects in terms of raising awareness and developing crisis logistics schemes.
In a context of war economy, the highest risk for goods ultimately lies in an increase in transport prices, which would no longer have a market reason to be below cost, as we saw in the fourth quarter of 2023 between Asia and Europe. The almost "compulsory" passage via the Cape of Good Hope is still being carried out for the moment above the profitability thresholds for the shipping companies.
3/ War economy and regulated transport prices
To take this argument to its conclusion, let us recall that a war economy implies a regulation of international commercial activity in relation to the export and import interests of this or that country or of this or that set of "friendly" countries.
In this context, supra-national institutions could agree to fix container transport prices by maritime "trades", which would de facto become the public tariffs charged by the companies.
We would then return to publications of "Commodity box rates" (CBR, container rate by type of goods and by port-to-port relationship), with renewable rates valid from 6 to 12 months, to be able to organise in a deteriorated operational context a continuation of activity that guarantees financial profitability for operators and a controlled rate for purchasers. It is now easy to harmonise CBRs globally on the basis of the international Harmonized Commodity Description and Coding System (HS codes). The publication of these CBRs would be a form of temporary return to regulated rates as they were applied by the liner shipping conferences before 2008.
In the light of these arguments, it therefore appears that the transition to a war economy could mean that for the duration of the conflict there would be a suspension of total deregulation of the market for the maritime transport of containerised goods... It remains to redefine what a conflict is, its precise geographical coverage and the duration associated with it as these international tensions and this combination of latent and open wars is today multifaceted.
