European shippers and forwarders alerted the European Commission on record box freight rates
The European shippers and freight forwarders have alerted again the Competition Directorate of the European Commission on the current practices of liner shipper carriers as European supply chains are becoming more distorted.
The associations will meet the Commission early in the new year, they said in a joint release yesterday “to further demonstrate the damage carriers’ behaviour is causing to trade growth at a time of economic recession”.
In a joint letter to the Competition Directorate of the European Commission, the European Freight Forwarders Association (CLECAT) and the European Shippers’ Council (ESC) have informed the Commission on issues arising from carriers’ ongoing practices.
These relate to the violation of existing contracts, the establishment of unreasonable conditions concerning the acceptance of bookings and the unilateral setting of rates far in excess of those agreed in contracts.
This situation is particularly affecting small European businesses with limited financial reserves. A telling example is that a French company producing electric bikes may go out of business as the company is not receiving spare parts out of Asia. Due to the delays and the lack of space, combined with the surge in tariffs, this start-up business is making losses and may not sustain in the near future, as the company is not able to finish its products for sale. The adverse consequences of carriers’ practices are felt equally by many larger companies, including retail, fashion, automotive, cosmetics and IT businesses.
In the last 10 weeks of 2020, box freight rates from Asia to Europe nearly quadrupled to in excess of $4,000 per teu.
“Carriers have been reserving for themselves the ability to change rates whenever they see fit notwithstanding the specific rates and charges agreed. Carriers are continuing to top their rates with surcharges, general rate increases, etc. Similarly, shippers and forwarders are being confronted with refused bookings and rolled cargo if carriers deem it more profitable to accept higher rated cargo for a particular sailing. Unacceptable practices also include imposing an extra fee as a price for accepting cargo at a new tariff charge, simply refusing to accept bookings at all for customers, forcing a customer with contract rates to move it to spot rates at much higher price.” the two European associations claimed.
For instance, the Shanghai Shipping Index reached a new record high of 2641,87 USD per TEU on Christmas day.
The two entities suggested that the disruption in the supply chain because of the unprecedented number of blank sailings (up to 30% on some trades), combined with the lack of reliability (with only 50% of ships on time over the last year), has led to the current shortage of empty containers.
Furthermore, carriers are trying to ship containers back to China as fast as possible, simply because there is a need and profits are extremely attractive.
This has led to a domino effect in as far as there is general shortage of equipment for European exports. Then forwarders and shippers are now also confronted with several new surcharges such as ‘equipment imbalance surcharges’ which carriers are imposing.
“If carriers decide to ship empty containers back to China for commercial reasons, is it doubtful whether it is justifiable to implement an ‘equipment imbalance surcharge’” the entities stated.