Bimco Calls For Global Efforts To Support Low Carbon Fuels

IN THE PAST 30 YEARS, WE HAVE GONE THROUGH DIFFERENT TRENDS IN THE OCEAN CARRIER MARKET.

New companies formed as container demand globally surged, we had major fluctuations with the 2008 financial crisis, and trend changed to carriers buying one another. Then, from 2013-14 onwards, we had been going through the alliances that are being formed. As carriers formed the alliances, there were struggles in the beginning with managing the vessels, port of calls, creating synergies and efficiencies.

After these 30 years, we reached to a new phase of a clear oligopoly in the market. If we look at the total capacity of the top five carriers globally, they represent a 75% share of the market. And, if we look at the top three alliances’ market share, on some trades we see a stunning 90% or higher.

EVEN IF WORD OLIGOPOLY DOES NOT SOUND VERY “TEMPTING”, THERE ARE BENEFITS OF THIS TRANSITION OF CARRIERS FOR SHIPPERS.

1. Carriers been able to focus on perfecting the alliances in the past 4-5 years. They had been able to refine procedures and the relations for alliances to work in a harmony.

2. Carriers losing money is bad for the market and stability is very important for international trade. Carriers making money sustains that stability and provides continuity. We experienced this when Hanjin went bankrupt and the ocean market was affected badly.

3. Lastly, economies of scale are also the only way to handle those increasingly large trade transactions and millions of TEUs. Carriers had been building ULCVs (Ultra Large Container Vessels) with up to 24,000 TEUs capacity being the largest by HMM. And, we cannot really expect one ocean carrier to load this vessel with one sling; they do need to have multiple carriers sharing those vessels.

THOSE WERE THE PROS OF AN OLIGOPOLY IN SHIPPING. NOW, LET US LOOK INTO THE CONS.

Firstly, I believe shipping is an essential business, so an oligopoly can create a major exposure in crises like we are going through now. Even if only one of the members of this group of companies failed or underperformed, it would create further pressure on the rest of the group and essential goods may get delayed, may get overpriced, and may become not accessible.

Secondly, oligopolies are supposed to benefit customers from the service quality and experience perspective. Unfortunately, we see a completely different trend and I am not writing this only now in the middle of the COVID-19 pandemic. I had shared in the past how many carriers’ service levels have been diminishing, and they are basically hiding behind digitalization to diminish their number of quality, experienced people. On top of that in a crisis like COVID-19, we had experienced huge delays both on schedules and the flow of information.

Lastly, it became further obvious that carriers are taking customers for granted. During the COVID-19 pandemic, we had an even much clearer picture on that. Overall, the approach of “take it or leave it” has been experienced by the market  – for freight rates, detention charges, underperformed trucking tasks, etc.

Obviously, someone can always argue around, and say for years customers take carriers and their services/investments for granted, too. I believe it is a not fair comparison though, because customers can only impact so much so little, while three alliances can literally sustain total control. This makes it very easy for carriers to take customers granted –those cargoes had to get on those ships no matter what.

THESE TWO SIDES OF THE CURRENT MARKET STRUCTURE ARE BASED ON WHAT WE HAD BEEN EXPERIENCING UNTIL NOW.

I hope carriers, shippers and authorities will all cooperate to increase the benefits of the current structure for all parties involved. We all know that we need each other more than we thought a year ago, so we should not be only focusing our own profits and our own benefits but understand the facts that what we are doing is essential for the world we are living in.

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