2M Damaging to World Trade, European Shippers Say

The European Shippers Council (ESC) has pulled the alarm bell about the excesses that could be caused by the Vessel Sharing Agreement (VSA) between Maersk and MSC.

In a letter sent to the US Federal Maritime Commission (FMC) last week, ESC said that the “operators might set up an extremely damaging situation to world trade.”

FMC has 45 days to review the proposal and the decision is expected on October 11.

Chief Executive of AP Moller-Maersk Nils Andersen told Reuters that the approval of 2M by FMC should be a formality as they had already approved P3.

According to ESC, the joint actions under the VSA could effect rates, like the introduction of blanking sailings, which “can clearly be seen as market manipulation to restore freight rate if needed by playing on the supply side. “

“Firstly, so called 2M should not be seen as a downgrade of the P3 (and thus considered positively) but as a huge upgrade of the individual ship owner position. The gathering of the two first ship operators will create a huge player that will be in a position to have such a power that they can distort the market for the purpose of price increase,” the letter reads.

ESC said that allowing these two operators to discuss and agree on some core parameters of the services can lead to a decrease of the competitive environment of the trade concerned by this agreement.

“Indeed, it will lead to a decrease in the number of direct call, a decrease of service quality and surely an increase of price.”

As an example ESC referred to the fact that “parties are authorized to discuss and agree on the allocation of terminal costs” (5.4 (a)), which gives them the freedom to increase relevant surcharges. According to shippers, this should be avoided.

In order to avoid competition problems, ESC proposed creation of a control system held by FMC that would monitor the link between the capacity available on the trade and the freight rates as well as the creation of surcharges.

“In the end, we acknowledge the objective of the agreement to « maximize operational and cost efficiencies », however, it would have been great for shippers to hear about how these efficiencies would be, partly at least, transferred to customers. Nowhere in the agreement are mentioned the customers and the possible improvement that this agreement will bring to the market. We are facing here a partnership whose only objective is to increase profit but not improve service,” ESC said.

Executive officials of the two container liners have been very busy last week, paying visits to FMC in Washington and regulatory bodies in China so as to clear the air for the VSA.

The executives asked FMC to swiftly approve their joint venture in order to avoid delay of the 2M launch scheduled for January next year.

World Maritime News Staff