Liner operators led by AP Moller-Maersk and Hapag-Lloyd are pushing back against executive action taken by US President Joe Biden to lower shipping costs.

The World Shipping Council (WSC) said there was no problem to fix and warned that legislative action would make the matter worse.

The liner body said that carriers had already "pulled out all the stops" to manage operational disruptions brought on by Covid-19, which is preventing ships from berthing and unloading cargo.

Danish giant Maersk blamed “the perfect storm” created by the pandemic as leading to “an interplay of many factors beyond any one stakeholders’ control”.

Germany's Hapag-Lloyd said that any legislative action should target the easing of infrastructure issues and not the lines.

'Highly competitive'

The WSC said that the liner industry remained highly competitive, and added that lack of competition is not the cause of cargo congestion.

New services have been launched, new carriers have entered the market, and the amount of vessel orders in the first half of the year surpasses 2019 and 2020 combined, it said.

“There is no market concentration 'problem' to 'fix,' and punitive measures levied against carriers based on incorrect economic assumptions will not fix the congestion problems,” WSC president and CEO John Butler said.

“Only normalised demand and an end to Covid-related operational challenges will solve the bottlenecks in the supply chain,” he added.

Box Club folds

Sky high freight rates have made lines increasingly sensitive towards the threat of regulation from the US as well as from European and Chinese regulators.

That has led liner operators to reveal they will disband the so-called Box Club, a talking shop comprising top executives of liner operations that have existed for the best part of 50 years.

Officially known as the International Council of Containership Operators, the ‘Club’ practice of holding yearly meetings twice per year seemed increasingly outdated in an industry under the watchful eye of competition regulators.

AP Moller Maersk chief executive Soren Skou chaired the soon-to-be disbanded Box Club for six years. Photo: AP Moller-Maersk

Maersk chief executive Soren Skou, who chaired the body from 2014 to 2020, said the Box Club had played “an invaluable role in the history of our industry”.

But lines had to “move forward to reinvent existing liner shipping industry organisations to meet the accelerating commercial and regulatory challenges of the future”, he said.

Unprecedented market

Lines have been increasingly forced to take a defensive stance against regulators in a market where freight rates have climbed to unprecedented levels.

Rates from Asia to the US east coast are particularly strong and rose nearly $700 to $11,045 per 40-ft-equivalent unit (feu) on Friday, more than 200% higher than the same time last year, according to the Freightos Baltic Index (FBX).

Rates from Asia to the US west coast dropped $500 to $6,046 per feu, but are still close to 151% higher than the same time last year.

The situation for shippers is likely to worsen in the coming weeks as container shipping enters peak season, but liner representatives say they cannot be blamed.

“We are dealing with a market aberration brought on by the pandemic and the resulting shifts in Americans’ consumption patterns,” he said.

“There are real and negative effects across the supply chain from those events, and ocean carriers are as anxious to return to a more predictable market as anyone.”

“In the interim, we urge everyone to make decisions based on the real facts about the situation before we create long-term negative results through ill-considered regulatory changes to handle a temporary situation,” Butler concluded.

Commoditisation of shipping

The liner industry has become increasingly concentrated with just three major shipping alliances — THE Alliance, OCEAN and the 2M Alliance.

But such a system had worked in favour of shippers by creating flexible solutions in the current environment, said Doug Morgante, vice president of US government relations for Maersk Inc.

“We find ourselves in this position as a result of the commoditisation of shipping which also leads to volatile markets which is not in the interest of anyone,” he said.

“Only through true partnerships — including regulators and policymakers — will we be able to make progress toward a less volatile and a more efficient port ecosystem.”

Hapag-Lloyd said the situation was due to the “tremendous demand from US customers and infrastructure shortages on the land side”.

“If regulations are intended, they should target to get the infrastructure issues eased,” a spokesperson said.