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2024 - pivotal year for container shipping

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2024 – pivotal year for container shipping

  • Posted by: SLA Admin Logistics

2024 appears to be a pivotal year for container shipping. The European Commission (EC) has declared it will not extend the exemption for shipping alliances, known as the Consortia Block Exemption Regulation (CBER), beyond its expiry date on 25 April. Introduced in 2009, after previous systems that permitted pricing coordination were banned, CBER enabled carriers to maintain vessel-sharing agreements and capacity pooling. This regulation was prolonged in both 2014 and 2020.

However, the EC recently deduced that CBER no longer fits its intended purpose due to its inability to achieve efficiency, effectiveness, and EU added value. With this change, liner shipping alliances operating within European trade routes will now be governed by the EC’s general competition rules concerning company cooperation. Some experts see this change as a move towards standardized competition rules in liner shipping. It implies that alliances may still exist but will likely require greater transparency and self-regulation.

Since 2020, CBER’s effectiveness has been under scrutiny. During this period, the shipping industry witnessed erratic shifts in freight rates and capacity access, majorly influenced by the Covid pandemic. In addition, many carriers diversified into various supply chain sectors. The EC observed that during this evaluation phase, there was an unprecedented surge in demand surpassing effective capacity, leading to massive profits.

Feedback from carriers and their representative bodies revealed gaps in understanding the CBER’s core provisions. The EC also remarked that this regulation hasn’t significantly benefited European consumers. Specifically, the market developments during the evaluation period solidified the inelasticity of demand and supply for liner shipping services. This dynamic diminished the chances of cost efficiencies by carriers benefiting transport users.

Although the EC didn’t directly attribute the recent supply chain chaos to CBER, it did hint at the regulation’s limited effectiveness during these tumultuous times. The evident opposition from various stakeholders, such as shippers, forwarders, and port operators, indicates a rift in the supply chain community. Many of these stakeholders, especially during the height of the Covid crisis, vocally opposed CBER, suggesting an unfair competitive advantage.

In summary, to foster trust among stakeholders and establish a robust, integrated supply chain, the EC believes that the liner shipping sector should align with the antitrust regulations applicable to other industries.

Author: SLA Admin Logistics
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