It’s official: The U.S. and German economies are in recession. The Organization for Economic Cooperation and Development expects the world’s most developed economies to continue to contract over the next year, with GDP likely to decline by 0.3 percent in 2009 for its 30 member countries.
The industry faces an uncertain future with slowing demand, falling freight rates and a surge in ship deliveries. Will there be more mergers and acquisitions? Will there be fewer service providers? Will competition diminish and prices rise?
Shippers are under enormous pressure themselves to reduce costs, putting more pressure on rates. We all hope the economic recovery comes soon to prevent lines from adding to the growing list of failed and bankrupt businesses.
The European Union is reviewing the consortia block exemption, which exempts certain activities of consortia from normal competition rules.
Carriers need to establish joint ventures or alliances to help them expand their range of services without requiring the investment otherwise needed. If they can do this, they are better able to survive. Liner shipping consortia offer opportunities for carriers to gain economies of scale that some shipping lines couldn’t attain otherwise. They offer shippers greater choice of carriers that can provide the range of services they require.
The shipping industry believes that rising fuel bills, falling cargo volumes and increasing environmental pressures point to the necessity to enable consortia to have more freedom of operation. If, however, one removes the market thresholds for consortia and agreements between consortia and non-consortia lines on individual trades, agreements could extend to any or all carriers. Here lies the problem: Extending the scope and scale of consortia agreements could result in a reduction of competition.
While shippers in general like consortia, they believe limits to the market share of any such operation is key to preventing companies from attempting to use the joint agreements to somehow manipulate and unfairly distort the market.
The global economy will undoubtedly recover and therefore the fundamentals of competition need to be preserved because they are the driving force behind sustainable growth and efficient services.