News
- Terry Walpole quoted in Lloyds List
- 3/9/2010
Shippers voice box line collusion suspicions
Rate increases and capacity reductions on major trade routes over past six months prompt renewed fears
Gavin van Marle
SHIPPERS have again raised questions over possible antitrust breaches by container lines on major trade routes amid increasing freight rates and capacity reductions.
Following the tremendous capacity squeeze that took place on the main Asia-Europe trade in the fourth quarter of 2009 — and is continuing through the early part of this year — Lloyd’s List understands shipper bodies are beginning to ask whether the capacity reductions and rate increases have been brought about by collusion.
“Are these people [carriers] colluding — because they are all doing the same things?” said Andrew Traill, managing director of industry interests group The Shippers Voice.
It is against antitrust laws to exercise price leadership, also known as signalling.
“The point about signalling to the market is that it depends on whether it has an effect on the market or is designed to influence others,” Dr Traill told Lloyd’s List.
“Carriers are allowed to say what they intend to do as long as they have not decided that collectively, which is a very difficult thing to prove.
“But I do think lines have to be very careful right now. They have turned people’s eyes towards them and I am aware of a number of shippers and groups that have been suggesting this needs to be looked at.
“It is only a matter of time before something develops here, and [lines] are treading a fine line. It all points to the old ways, which are now illegal.”
Nonetheless, forwarders working in the trade said they expected freight rates to continue to rise, albeit not as steeply as in recent months, as capacity continues to be constrained.
At Kuehne+Nagel’s annual results announcement last week, northwest Europe director of sea freight Diederick de Vroet made a direct connection between reduced capacity and rates. He said last year “was the year which changed all our normal rational behaviour”.
“Carriers found a control mechanism to reduce capacity to motivate rate levels,” he added.
Fresh research by Danske Bank of Denmark shows that the rate per teu from the Chinese ports of Shanghai, Ningbo and Shenzhen rose from an average of $1,200 per teu in October last year to an average of $2,134 last week, a figure that includes surcharges but not terminal handling charges levied on shippers at the ports of loading.
The bank’s Asia-Europe container index, a survey of European freight forwarders, also suggests that forwarders believe rates will increase further over the next month, with an average of $2,286 predicted for the middle of April.
Danske Bank transportation equity analysts Johannes Moller said forwarders believed rates would continue to climb based on the general rate increase notifications that they were receiving from carriers.
“Maersk has just announced a $250 per teu increase, which is indicative, but we have also noticed a shift in sentiment,” Mr Moller said.
“The belief is that while rates still seem to be rising, the speed of rate increases has come down and the most likely scenario seems to be a more stable rate environment in the second quarter.”
But rate increases are likely also to be to the benefit of many freight forwarders, according to freight forwarder Belville Rodair chief executive Terry Walpole.
“I cannot imagine that some freight forwarders are not a little pleased that carriers are getting their acts together. I think they are being a little bit more sensible, and hopefully they will get us all out of the mess.
“Think of it as trying to climb back up a slope one has fallen down. You cannot do that until you have stopped falling and gathered yourself together, and that is where the carriers are now.”
Mr Moller demonstrated how K+N will expect to see its gross profit per teu improve as rates rise. He calculated that its gross profit per teu reached a high of around €380 ($517) in the fourth quarter of 2008, declined as rates fell in the first half of 2009 and bottomed out at around €290 per teu in the third and fourth quarters of 2009.
He predicted that K+N’s gross profit per teu would rise to slightly under €320 in the second, third and fourth quarters of this year.
“We are heading towards a much more stable environment,” he said.
Mr Walpole believed that as a result, new capacity was unlikely to be added any time soon.
“Capacity will not be coming back until the rates are high enough and the carriers feel there is enough good-paying cargo to full another ship,” he said.
“They make money when there is full capacity and the highest possible freight rates, and they have just lost a lot of money over a sustained period of time.”From Lloyds List