Shippers should stop calling for the total abolition of liner shipping conferences such as the Far Eastern Freight Conference and seek more meaningful co-operation with carriers, according to Professor Hercules Haralambides, director of the Centre for Maritime Economics and Logistics (MEL) in Rotterdam, the Netherlands.

He also suggested Asian and other global container shipping lines should step up co-operation with each other, particularly in relation to planning fleet capacity, if they want to strengthen their role as overall supply chain managers.

The proposals come as the European Commission (EC) moves closer to drawing up new guidelines for the application of EU competition law to liner shipping conferences. MEL acted as adviser to the EC Competition Directorate in an earlier re-evaluation of EU Regulation 4056/86 that currently exempts liner conferences from anti-trust legislation.

The issue of how the liner shipping industry should be regulated in Europe if the regulation is abolished, which appears increasingly likely, hit the headlines again earlier this year when the European Liner Affairs Association (ELAA) submitted its final proposals to the commission.

Prior to that development, the ELAA, which is representing liner shipping companies in the EC's current regulatory review process, was condemned by the European Shippers' Council (ESC) for "its refusal to provide the ESC with the details of their proposals for an exchange of information system to replace the liner conference system, following the proposed repeal of the liner conference block exemption regulation".

Subsequently, the ESC urged the EC and EU member states to "reject the ELAA proposals and insisted on the liner shipping industry operating under normal
rules of competition that apply to the rest of us".

"We have no problem with the notion of making better information more publicly available in order to facilitate better business decisions, but not at the expense or risk of anti-competitive practice or collusion in the market," added ESC general secretary Nicolette van der Jagt.

Commenting on the ESC claim that it had not been consulted by the ELAA over the latter's proposals, Haralambides suggested the shipper's organisation was giving out mixed messages.
 

"Shippers have been very scornful about the ELAA's ideas for consultation bet-ween them and the shipping lines," he claimed. "For example, they have said that wider industry meetings involving lines, shippers and others to review markets and trade forecasts would be a waste of time. But if the shippers take that sort of stance, they cannot complain about a lack of consultation."

Overall, he continued, shippers needed to take a more positive attitude towards working with carriers. "Instead of adopting their present scornful approach to consultation with the liner shipping industry and claiming that markets should be left alone to do their job, it would be to their benefit to have some more meaningful co-operation with carriers."

Haralambides also suggested that for their part, the lines needed to consult more with each other about their future capacity development plans if they wanted to expand their role as global supply chain managers rather than simply continue as providers of space to NVOCCs (non vessel operating common carriers) and 3PLs (third party logistics providers).

"All the lines - the Asians, the Europeans and everyone else - are currently investing in logistics and bundling together the different components of the overall supply chain so they can compete with the NVOCCs and 3PLs to be supply chain managers," he explained.

At the moment, though, continued Haralambides, the competitiveness of lines in that context risked being undermined by the fact that the container shipping industry was building too much capacity. The likelihood was that at some point in the future, depending on what happened to China trade with the rest of the world, the industry would experience a glut of container slots, leading to falling rates and renewed pressure on carriers.

"My message to the lines is don't build too many large ships that you will never be able to fill without selling some space to NVOCCs and 3PLs, who are actually your competitors when it comes to managing supply chains," he said. "If you sell capacity to shipping line alliance partners or exchange slots with them, then fair enough. That is industry efficiency. But if you have to sell capacity wholesale to NVOCCs and 3PLs to fill your ships then that, in my opinion, is silly."

He said the ELAA's recent submission to the EC had in fact included references to the need for improved public exchange of information and greater consultation between all sectors of the industry.

"I believe that better information exchange, as outlined in the ELAA's revised proposals, will give each and every shipping line the opportunity to gain a better insight into market capacity requirements and plan their future slot development accordingly," he said.

Asked whether it was realistic to expect container shipping lines to treat NVOCCs and 3PLs as competitors for supply chain management business rather than as customers when it came to selling capacity, Haralambides agreed it would be hard for individual lines to adopt such an approach.

"It is easy to say that such a strategy makes sense but it would be very difficult to put it into practise. Certainly, one carrier trying to do that on its own would be committing commercial suicide. All the carriers would need to do this together," he said.

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