UK freight association calls for government review into ‘dreadful’ container market

Felixstowe, England; 5 September 2020; A series of 3 powerful images of the busy Container Port of Felixstowe, Suffolk on the English East Coast. The images were taken from Shotley Gate in Essex on the opposite bank of the Orwell and Blackwater Estuaries on which this Deep Water Port sits. Felixstowe is one of the busiest container Ports in the world and these 3 images clearly depict the size and scale of the operations there. The numerous, colourful stacked containers and the gantries or cranes above them with more in the process of being loaded and unloaded to a moderately large ship are clearly depicted. The names of the various shipping companies including Maersk, Hamburg Sud, COSCO, Safmarine, and P&O are clearly visible and illustrate the diversity of this industry. This third and final image is of the front of the ship being loaded with containers suspended in mid-air from the cranes and gantries above. The industry and the scale of the operations at this port are clearly depicted.

The British International Freight Association (BIFA) has written to the UK Government requesting investigation into the state of competition within the current deep sea container shipping market.

BIFA argues that its members are concerned that practices undertaken by the principal container shipping lines, as well as easements and exemptions provided to them under competition law, are distorting the operations of the free market to the detriment of international trade.

In a letter to Robert Courts MP, Parliamentary Under Secretary of State at the Department for Transport, BIFA’s Director General Robert Keen expressed the trade association’s concern that during a period of well-documented chaos within the container shipping sector, commercial power “is becoming increasingly concentrated, resulting in diminished market choice and competition, and distorted market conditions.”

Keen wrote, “BIFA members fully accept that a free market economy is open to all, but are increasingly concerned that the activities of the container shipping lines, and the exemptions from legislation from which they benefit, are distorting the operations of that market to the shipping lines’ advantage, whilst adversely and unfairly affecting their customers, especially freight forwarders and SME businesses.

“The facts speak for themselves. During a period that has seen EU block exemption regulations carried forward into UK law, there has been huge market consolidation.”

In 2015, there were 27 major container shipping lines carrying global containerised trade, with the largest having a 15.3% market share. Today, there are 15 shipping lines, organised into three major alliances carrying that trade, with some analysts observing that the market share of a single alliance on certain key routes could be over 40%, Keen noted.

He continued, “The pandemic has highlighted and accelerated this development, which has also contributed to dreadful service levels, and hugely inflated rates, with carriers allocating vessels to the most profitable routes with little regard to the needs of their customers.”

Keen said that shipping analysts Drewry recently issued a profit forecast of more than $150 billion for 2021 for the main container shipping lines for which financial results are available.

Latest data from analysts Sea-Intelligence noted that the shipping industry’s Q32021 financial performance made an eye-watering $37.24 billion in operating profit in the third quarter alone – driven largely by record-high freight rates.

In the US, in August last year the Federal Maritime Commission (FMC) launched an expedited inquiry into ocean carrier practices in respect to certain surcharges, as part of its investigation into the US maritime sector.

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