Shippers should think twice on lobbying the EU to lift the block exemption regulation (BER) for liner shipping
Singapore, 11 April 2019 – Wading into the war of words between shippers and carriers in recent weeks, speakers at the TOC Asia Container Supply Chain conference in Singapore claimed removing the BER would yield no benefit to cargo owners.
“There was a lot of heated discussions at the recent OECD meeting in Paris,” revealed Sea-Intelligence chief executive Alan Murphy.
“All the stakeholders are pissed off with the shipping lines on everything – reliability, blank sailings, and how they cooperate together in alliances.
“Now the EU Commission has given those stakeholders a club to beat the shipping lines with – that the BER should be lifted.
“But I don’t think they actually want that; I think that would result in a poorer situation for most of the shippers.”
The BER, which is the de facto legislation covering liner alliances and vessel sharing agreements (VSAs) on container trades to and from Europe, is set to expire on 25 April next year.
Mr Murphy said alliances and VSAs have led to high cost savings for carriers, “which they’ve obviously not retained because they haven’t made any money – they’ve passed the savings on to the shippers and the consequences have been lower freight rates”.
Furthermore, he noted, if the EU Commission does remove the BER, then VSAs would not become illegal but rather more difficult and costly to implement due to additional reporting requirements. As a result, larger carriers would likely continue with VSAs while smaller players would find it more difficult.
Thomas Elling, Hapag-Lloyd’s head of sales and customer service, agreed that lifting the BER would not affect carriers’ ability to share vessels or space.
“That will certainly continue in any case,” he said. “I also don’t necessarily see any per sebreak-up of the different alliances as you see them today, that scenario might change if there’s another acquisition or merger, but at this point in time that’s also not so likely.”
Alphaliner chief analyst Tan Hua Joo said shippers should be “careful what they wish for”.
“It is unclear on the part of the regulators, as well as the shippers right now, exactly what is the outcome they desire,” he said, claiming alliances are “the single largest driver of the very low freight rates in the market.
“If you do remove this as a tool for the shipping lines to use, are you prepared to accept higher freight rates as a consequence? Which is the most likely result of taking away this exemption,” he added.
Jeremy Nixon, Chief Executive of Ocean Network Express (ONE), told The Loadstar: “I think it’s in the interests of trade – it’s in the interest of the industry both on the shipper side and the carrier side that consortia continue to operate, because that provides efficient slot costs and the best frequency and widest range of coverage.
“The economists are largely in consensus agreement on that and I understand the EU now is reviewing – probably not the removal of the block exemption but looking at possibly some alterations in the protocols or regulations and we just have to wait for that.”