Transportation & Logistics Analysis

Container shipping: the exemption regulations look to have been saved

March 12 2020

The lobbying by shipping companies to keep the container transport block exemption regulations that they benefit from has paid off. The European Commission has included this extension in its 2020 work program, drawing the ire of shippers, freight forwarders and port operators.

If it needed a final boost, it may have come from the coronavirus outbreak, which is currently plaguing global shipping, among other sectors. Struck hard by the slow resumption in activity after the Chinese New Year, some companies have sounded the alarm, as has Maersk. It is unclear whether this new crisis was a decisive factor, but what is clear is that the European Commission has listened attentively to demands made by consortia to extend the block exemption system that they benefit from .

While most players in the supply chain are calling for the end of this exemption mechanism, which allows shipping companies to operate in alliances, the European Commission is adamant in its desire to allow it to persist.

A quick reminder of the calendar:

  • As of April 1st, 2020, regular shipping line companies were expected to lose the overriding right to work in alliances (or consortia).
  • In December 2019, against all expectations and in a rather anticipatory manner, the commission proposed an extension of the exemption for 4 years, despite the fact that consultation of the stakeholders was still in progress, as it had been planned from November 20th, 2019 until January 3rd, 2020.
  • The Work Programme 2020 presented on January 29th by the European Commission explicitly proposes the extension of the system of group exemptions, arguing that it “will continue to simplify the analysis of consortia’s compliance with competition rules, limit the dependency on external advice and reduce legal costs ”.

Strong reactions

In a joint press release issued on February 10th, European professional organizations representing shippers, freight forwarders and port stakeholders reacted strongly. According to them, the arguments put forward by the Commission have numerous legal shortcomings:

  • Lack of data
  • Efficiency-gain hypotheses based on a single party's vision that do not integrate parameters other than freight rates
  • The absence of an exact definition concerning the relevant geographic scope for calculating market shares
  • A total inability to identify benefits for users.

A good opportunity for shipping companies

There is no question that shipping companies are currently suffering, but probably a little less than they would like us to believe. The decreased activity makes it possible to more or less maintain freight rates and turns out finally to be a good opportunity to delay the release of new scheduled capacities.

The crisis is also making it possible to calmly organize the new 2020 services into "blended families". Consortia have actually experienced several movements: Hyundai has left its partnership with 2M in favor of integration into the Alliance, and Zim has taken over the jumpseat that has become free in the 2M alliance. These movements have resulted in inflows and outflows that are easier to implement in a context of a lull in activity.

Overall, the companies actually remain confident in their ability to deploy expanded capacity in the weeks following the recovery ... which will inevitably happen. In the meantime, they have been able to skillfully ride the wave of economic anxiety to move their pawns forward in front of a European Commission which had, as it happens, been receptive to the arguments of the shipping companies even before the outbreak for the crisis.

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Expert in Ocean shipping for 25 years, Jerome puts all his knowledge of the industry to contribution for Upply. Ship captain at heart, he has written the English-French Lexicon of Containerized Shipping (Paris: CELSE, 2001).
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