Monday 22nd Oct, 2018

Contracting liner shipping market risks effective competition

Photo: David Sexton
Photo: David Sexton

A REDUCTION in the number of shipping lines poses competition risks Global Shippers Forum secretary-general Chris Welsh says.

Mr Welsh travelled all the way to Melbourne from Britain for the GSF2018 and ICHCA International Conference and Exhibition.

He noted the reduction in the number of lines including the spectacular case of Korean company Hanjin which went bust two years ago.

“What we have (in global container shipping) is three global alliances where these 13 lines control most of the world’s main trade routes,” Mr Welsh told the gathering at Melbourne Convention Centre.

“Most of those alliances now have a very dominant role in the shipping markets where they hold market shares around the 30% mark – some over the 30% mark – which should start (among regulators) some competition concerns in regard to how they impact customers and the market.”

Mr Welsh noted comments from the head of Maersk Line (Søren Skou) that there would be five major container ship operators on the main port routes within the next five to ten years.

“I think it will come quicker than that. We (have seen) the highest rate of consolidation through merger and acquisition in the last 18 months than we have in the last twenty years with some of the big names in container shipping disappearing.”

Mr Welsh said historic benefits of the consortia system was that it provided benefits to customers by using economies of scale.

“But they were typically vessel sharing agreements with much lower market shares – typically 10-15% – where it was purely about the sharing arrangements rather than the complexities of the liner system.”

Mr Welsh was challenged about his comments during a subsequent panel discussion where it was put to him shippers themselves had to be responsible given the struggling nature of the shipping market.

“The focus has been increasingly (about) controlling costs rather than looking at what the market wants or what the customer wants,” Mr Welsh responded, making mention of some presentations from earlier in the day.

“In other words they’ve lost focus away from what they are trying to deliver for customers.”

Send this to friend