​​​​​​Analyst: Freight rates would skyrocket without alliances

   A leading industry analyst told the TOC Container Supply Chain conference in Rotterdam on Wednesday that opposition to container carrier alliances by shippers is misplaced.
   Elimination of alliances would result in freight rates “skyrocketing,” said Lars Jensen, chief executive officer of SeaIntelligence Consulting. 
   The European Union is currently studying whether to extend the Block Exemption Regulation for liner shipping consortia past April 25, 2020.
   The regulation allows container liner companies to operate with vessel-sharing agreements, including the three major alliances that dominate the east-west container trades. They are the 2M Alliance of Maersk and Mediterranean Shipping Co.; the Ocean Alliance of COSCO, OOCL, CMA CGM and Evergreen; and THE Alliance of Hapag-Lloyd, ONE and Yang Ming.
   In April the European Shippers Council (ESC) called for repeal of the consortia block exemption regulation unless legislation clarifying it was adopted. ESC said the current regulation “has not contributed to better services in maritime transport for shippers as it aimed to.”
   “If the anti-trust exemption isn’t extended, that doesn’t necessarily mean that shipping lines can’t run alliances. It may well just mean that the lines have higher hoops that they have to jump through, and I have no doubt that they will do that. But it will mean a lot in legal costs and the carriers will have to recoup those costs and the only way they can do that is through higher rates,” Jensen said.
   “However, if shipping alliances are outlawed altogether, then freight rates will skyrocket because alliances are the only way that carriers can operate ultra-large container ships (ULCVs) effectively.”
   Jensen said on their own, carriers such as Maersk and MSC would operate significantly fewer services between Asia and Europe, for example, and call fewer ports.
   “If you are shipping from a Shanghai container yard to a Rotterdam container yard, then that’s fine, rates will stay relatively low, but for any other origin or destination, you will have to use far more transshipment than currently used and shippers will be faced with an enormous jump in freight rates.” he said.
   “I am of the opinion that shippers should pray that lines are allowed to continue to operate alliances.”