US warns box lines against transpac collusion

Federal Maritime Commission says it has ‘heightened its scrutiny of markets, individual ocean carriers, and the three global carrier alliances in response to the unusual circumstances and challenges created by the COVID-19 pandemic’.

The US Federal Maritime Commission (FMC) has warned container lines that it will act against any perceived violation of competition rules, and it has “heightened its scrutiny of markets, individual ocean carriers, and the three global carrier alliances in response to the unusual circumstances and challenges created by the COVID-19 pandemic”.

Following a private meeting yesterday, the FMC said it had examined market trends in trade lanes serving the United States and actions taken by both individual ocean carriers and global alliances in response to COVID-19 and related impacts to the shipping industry.

Although the FMC regularly holds meetings to receive updates on international trade, the container shipping industry, and analysis of carrier agreement monitoring activities, the agency said it “has heightened its scrutiny of markets, individual ocean carriers, and the three global carrier alliances in response to the unusual circumstances and challenges created by the COVID-19 pandemic”. This week’s meeting focused on those developments, it said.

“Specifically, the Commission received detailed reports that addressed trends in spot rates, longer-term service contracts, utilisation of equipment, blanked sailings, revenue trends, the policies of individual carriers and global alliances for service changes, and what notice must be provided to the FMC when there are blanked, cancelled, or amended voyages,” the agency said.

“The FMC is actively monitoring for any potential effect on freight rates and transportation service levels, using a variety of sources and markers, including the exhaustive information that parties to a carrier agreement must file with the agency.

“If there is any indication of carrier behaviour that might violate the competition standards in section 6(g) of the Shipping Act, the Commission will immediately seek to address these concerns with the carriers.  If necessary, the FMC will go to federal court to seek an injunction to enjoin further operation of the non-compliant alliance agreement.”

Concern in China 

The FMC’s comments follow concern in China about escalating freight rates and capacity issues on the transpacific market.

As reported by Lloyd’s List, China’s Ministry of Transport last week invited the China heads of 14 carriers involved in the transpacific trade — including all members of the three major shipping alliances — to a “consultation” held at the Shanghai Shipping Exchange last Friday. Aimed at “stabilising the international container shipping markets”, the Ministry of Transport made a series of enquiries about the business and operations of the shipping lines, and specifically asked what measures the shipping companies had taken to “curb the excessively fast mark-ups on China-US routes”, and to pass on the cost savings from the drop in oil prices and reduction of port fees.

Lloyd’s List reported that there has been some market talk that the authorities had asked the carriers to halt the general rate increase set for September 15 and reinstate planned blank sailings, although it reported that one shipping executive who attended the gathering said no such explicit request was made during the discussion, adding that the government officials were refraining from direct intervention in the market.

However, Cosco Shipping, which controls the world’s third-largest box shipping fleet, was said to have withdrawn the next price increase on at least a couple of China-US west coast services and abandoned earlier scheduled void sailings for October, Lloyd’s List reported. Lloyd’s List also reported that Cosco subsidiary OOCL has also dropped a plan to blank a series of transpacific sailings, following the meeting between carriers and the Chinese government last week.

Spot rates continue rise

The moves by the US and Chinese authorities come as the gap between short- and long-term contract ocean freight rates on the transpacific trade lane has risen to a new record difference of US$2,400 per FEU.

And the latest World Container Index freight rate assessments on eight major East-West trades by Drewry shows that spot freight rates have continued to rise during the past week on all of the main East-West trades, with its ‘composite index’ of the eight trades combined up 6.1% this week and 104.9% up when compared with same period of 2019.

According to Drewry, average spot freight rates from Shanghai to Genoa surged 26% or $572 to touch $2,790 per 40ft box. Also, Shanghai to Rotterdam rates increased by 7% – an increase of $153 to $2,287 per feu.

Rates on Shanghai to Los Angeles nudged up by 2% to stand at $3,922 per 40ft container. Similarly, rates from Shanghai to New York strengthened 3% – a change of $127 and reached at $4,716 per feu. Spot rates from Rotterdam to Shanghai climbed 4% or $55 to touch $1,294 per 40ft container.

The average composite index of the WCI, assessed by Drewry for year-to-date, is $1,802 per 40ft container, which is $371 higher than the five-year average of $1,431 per 40ft container.

Drewry expects rates to remain steady in the coming week.

Source: lloyd’s