U.S. Watchdog Seeks Assurances on Planned Shipping Alliance
August 31 2016 - 8:20AM
Dow Jones News
The U.S. maritime watchdog won't give the green light to a giant
shipping alliance unless it provides guarantees of fair pricing for
clients moving cargo in and out of the U.S., a senior industry
executive said.
The Federal Maritime Commission delayed last week the approval
of the Ocean Alliance, an alliance of a group of European and Asian
container operators, that together move 39% of all cargo between
Asia and North America and 35% between Asia and Europe.
"I am concerned about possible joint contract issues," said
William Doyle, an FMC commissioner on Tuesday. "An alliance is not
a merger and if they are using their combined strength to negotiate
prices with shippers and other parties like tugboats, and bunkering
operators, that's a concern."
Mr. Doyle said that Ocean Alliance members—France's CMA CGM,
China's Cosco Group, Hong Kong's Orient Overseas Container Line and
Taipei-based Evergreen Marine—must give assurances that they will
be negotiating as individual operators, rather than as a group.
"If they get together, sharing information, then there is room
for a price effect," he said.
A spokeswoman, for CMA CGM, the group's biggest player, said the
company would cooperate with the FMC's inquiry. The Ocean Alliance
is set to start operations next year and must also get approvals
from Chinese and European regulators.
Alliances have taken on increased importance in a
global-shipping industry buffeted by overcapacity, low freight
rates and slowing volumes.
By entering into alliances—in which firms share everything from
ships to port calls—companies significantly cut operational costs.
Container ships move 95% of the world's manufactured goods ranging
from designer dresses and food to electronics, toys and
furniture.
Customers say vessel-sharing agreements slow down cargo
movements.
"I have not seen any sign of higher prices, but I have seen
fewer ships having container space for low-value products, like
ours," said Bob Haberman, who runs Number 9 Hay LLC, based in
Ellensburg, Wash. "I fear service quality will deteriorate with
fewer players out there."
Mr. Haberman ships around 5,000 containers of hay a year to
Japan, South Korea, China and Taiwan. He said that in the past 10
days he told customers that scheduled shipments would be delayed
for two weeks.
In April, the Agriculture Transportation Coalition, a
Washington-based trade body, asked the U.S. Senate Commerce
Committee to press the FMC for a thorough review of shipping
alliances.
The alliances have already caused problems for exporters because
the various members share space on giant ships, mixing cargo and
making it more difficult for exporters to get their goods to the
right destination than in the past when the operators used smaller
ships, cargo owners in Europe, Asia and the U.S. say.
The confusion is exacerbated because shipping operators switch
alliances as the industry consolidates.
"In the short term, the formation of a new alliance is
disruptive for customers," said a spokesman of Maersk Line, which
has formed the 2M alliance with Geneva-based Mediterranean Shipping
Co. "There will be periods with frequent changes and fluctuating
reliability."
Container operators say that by next year, the alliances will
offer better service compared with individual operators. Their
shared resources will give cargo owners more sailings at the best
price, they have argued.
The 2M, already approved by regulators, has a 16% market share
in the Asia to North America route and a 34% share for Asia to
Europe. A third grouping called THE Alliance, made up of German,
Japanese and Korean operators, is also awaiting regulatory
approvals and will have a 39% market share for Asia to North
America and 30% for Asia to Europe.
Write to Costas Paris at costas.paris@wsj.com
(END) Dow Jones Newswires
August 31, 2016 09:05 ET (13:05 GMT)
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