THE World Shipping Council has rejected claims made by US President Joe Biden in his State of the Union Address on 2 March. Namely, that demand-driven disruptions to supply chains are due to the container shipping industry being highly concentrated, thereby implying the industry is not competitive.
“The claims made by President Biden during his speech are not indicative of the industry or market dynamics,” the WSC said in a statement.
The WSC has produced data, based on the Herfindahl–Hirschman Index (HHI), which rates markets using a 0 to 10,000 scale, and is used by competition authorities in the US and the European Union to determine the existing level of concentration in a given market.
The higher the number, the more concentrated the market — with an HHI below 1500 considered competitive, between 1500 to 2500 moderately concentrated, and above 2500 highly concentrated.
The data shows that on the trade lanes most relevant for US trade (Asia – US West Coast and Northern Europe – US), HHI levels are indicative of competitive markets, and no single supplier has more than 25% of market share.
The HHI for the container shipping industry serving Asia – US West Coast is 1018. For Northern Europe – US it is 1508. Both figures are lower than in many other industries, including wireless carriers, domestic airlines and local broadcast television.
John Butler, president and CEO of the WSC said, “Here are the facts: container shipping is a competitive industry with multiple ocean carriers actively challenging one another in the global marketplace and on the shipping lanes most relevant for US trade.
“It is disappointing that unfounded allegations are being levied against an industry that is moving more cargo right now than at any time in history in order to meet the unprecedented demand for imported goods during the pandemic.
“The truth is that with demand for ocean transportation services into the US at record levels, market dynamics are influencing prices – not carrier alliances,” he said.
Mr Butler said vessel sharing agreements (VSA) are purely operational compacts that enable carriers to share space on one another’s ships, which increases efficiency and supports more service to more ports than would otherwise be the case.
“Importantly, the operational agreements do not include commercial co-operation,” he said.
“Each member of a VSA or alliance determines its own commercial terms, including prices, which are not discussed between alliance members. Every VSA is filed, reviewed, and continuously monitored by the FMC.”
The WSC said the legislative proposals currently before Congress would “upend the global transportation system, reducing service for US importers and exporters and raising costs for American consumers and businesses”.
“We urge the administration and Congress to enact measures that will relieve the current congestion and set America’s supply chain up for long-term success,” Mr Butler said.
