Tuesday, April 4, 2017

PROBLEMS WITH NEW CONTAINER LINE ALLIANCES

Cargo Owners Complain of ‘Total Mess’ Shipping Goods to Asia

Launch of new shipping alliances sparks delays in Europe; ‘19 containers of olive oil stuck in Rotterdam’


A Hapag Lloyd container ship is loaded at a shipping terminal in Hamburg, Germany, on March 25.
A Hapag Lloyd container ship is loaded at a shipping terminal in Hamburg, Germany, on March 25. Photo: fabian bimmer/Reuters
The launch of two global container-shipping alliances this week got off to a rough start, with cargo owners in Europe complaining of long delays to carry goods to Asia.
The backlog is especially intense in northern European ports like Hamburg and Rotterdam where shippers say they have been asked by brokers to pay as much three times the agreed freight rates if they want priority handling.
“I’ll have 19 containers of olive oil stuck in Rotterdam for five weeks,” said Panagiotis Eleftheriou, a Greek agricultural-products exporter. “It’s a total mess, the worst I’ve seen in 20 years in this business.”
The two groupings—Ocean Alliance and THE Alliance—comprise 10 container operators that move close to 60% of all cargo between Asia and Europe; they have made network changes in a move to save costs by sharing vessels and port calls. A third alliance made up of the two biggest players, Maersk Line of Danish conglomerate A.P. Moller-Maersk A/S and Switzerland-based Mediterranean Shipping Co., has been in place since early last year.
Industry executives said the current backlog stemmed from a rise in cargo destined for Asia and operators sending empty containers to Asia in anticipation of capacity shortages shortly before the launch of the alliances.
“There has been an unexpected increase of cargo from Europe to Asia,” said Rainer Horn, a spokesman for Germany’s Hapag-Lloyd AG, the leading carrier in THE Alliance, which also includes four Asian operators. “We regret any inconveniences and hope things will return to normal soon.”
Mr. Horn said many ships are still operating under previous groupings and gradually joining the new alliances, which he expects will fall in place over the next couple of months.
France-based CMA CGM, Ocean Alliance’s lead carrier, declined to comment.
An executive from an Asian operator said the situation is “embarrassing,” with many vessels only now starting to make their way to Europe under the new alliance structures.
“The Europe side of the equation was not properly assessed,” he said.
Container ships move 95% of manufactured goods world-wide, but during the past three years freight rates have tumbled amid anemic global trade to around half of break-even levels. The world’s top dozen operators reported around $5.5 billion in combined losses last year.
“When two groups that move around of two-thirds of cargo decide to reorganize at the same time major problems arise,” said Nik Delmeire, general secretary of the European Shippers’ Council, which includes thousands of manufacturers, retailers and wholesalers. “There was no decent preparation, not enough communication with cargo owners.”
Weeks before the alliances began operating, the U.S. Department of Justice opened a probe of the industry’s pricing practices, people familiar with the matter said. Investigators crashed a mid-March meeting in California and issued subpoenas to top executives at several companies.
Write to Costas Paris at costas.paris@wsj.com
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