Newsroom Blog
Collective action
By Lloyds List Comment
Monday 8 February 2010
IF THE reports from Asian shippers of cargo rolling are to be believed, then the collusion between container lines to stabilise rates may be going too far.
The problem of collective action is troublesome. The European Union eradicated liner conferences in a bid to make shipping adhere to the free-market principles that, in theory, provide the best way to work any industry out of a crisis. When open competition reigns, conditions may drive some players to extremes at first, the thinking goes, but equilibrium will emerge and a true price-discovery mechanism comes forward.
Indeed, in the past, when the lines in the Pacific sought collective action, some broke ranks and dumped rates for personal advantage. Was this lack of discipline or simply market forces?
The question is moot now. Asian Shippers’ Council chairman John Lu says members of the Transpacific Stabilization Agreement “are working very nicely together and they really are holding to the so-called guidelines, so everybody is cutting production diligently, in a disciplined manner. The cartel has become more powerful.”
That “cartel” in January imposed an emergency charge to make interim revenue recovery before the next service contract in May. The policy guideline ranged from $320 per teu-$505 per 45 ft container and was voted in unanimously.
The lines are also adopting aggressive practices, according to Mr Lu. These include alleged reneging on contracts and forced renegotiation of terms. There are even charges that some owners are bullying shippers to pay extra to get freight moved.
Some or all of this may be happening. If so, then sharp practice has gone too far. But overall, the spirit behind the TSA January action, and the discipline that the lines have shown since, is a reminder of just how serious a situation owners are in. These are not capricious actions for individual company gain, but a carefully considered and executed bid for survival.
That said, if individual shipowners are exploiting the situation for gain then it will be self-defeating. It will lead to pressure to eradicate conferences in Asia, much as they have been abolished in Europe. Sharp practice may also slow trade, just at the point when trade growth is making a tentative return.
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