POSITION | MARITIME TRANSPORT | MOBILITY & LOGISTICS
Tensions in International Container Shipping Four key demands of the maritime shippers’ industry
June 3, 2021
Background The 400-meter, 224,000-ton, fully loaded container cargo ship EVER GIVEN, flying the flag of Panama, went off course in the Suez Canal on March 23, blocking passage through the Suez Canal in both directions for about a week. At 193 kilometres, the Suez Canal is the shortest sea route between Asia and Europe. In 2019, nearly 19,000 ships passed through the canal, over 50 ships daily; just under twelve percent of global trade (see https://de.statista.com). The incident therefore subsequently led to a significant backlog of nearly 400 ships at both entrances to the canal, with negative effects on maritime supply chains. This is because the blockade, with its after-effects on industry supply chains, came at an inopportune time and exacerbated a tension situation in international container shipping that had been building up since the end of 2020. Even before the blockade, however, maritime shippers reflected the tense situation in container shipping, especially on routes between Asia and Europe: a lack of container availability, a lack of transport capacity and unpunctuality of ship arrivals, as well as quality deficits coupled with rising transport costs, had already been affecting supply chains across sectors and in some cases also production processes since the turn of the year. Increasingly incalculable freight costs for container shipments, for example on sea routes to North America that are important for German industry, are making it difficult for companies to plan their logistics processes as a result of short-term and unforeseeable additional costs, which also have a considerable impact on product prices. Furthermore, a noticeable increase in the postponement of container departure times and dates by shipping companies is an additional burden on the industry's ability to plan maritime supply chains and production processes. The resulting delays in import and export shipments, some of which are substantial and can last several weeks, are detrimental to companies. Additional transport volumes can hardly be found at short notice and in some cases can only be shipped after several weeks while in some cases contractually agreed volumes are not being met by the shipping companies. The blockade in the Suez Canal further exacerbated the situation. As a result, the shippers’ industry, which relies on raw material or component deliveries as well as the shipment of its finished goods and
Robin Kunst | Mobility and Logistics | T: +49 30 2028-1751 | r.kunst@bdi.eu | www.bdi.eu
Tensions in International Container Shipping
products via sea transport, has to face not only the impacts on its maritime supply chains but also disruptions to its production processes. Liner shipping from Europe and Germany to Asia-Pacific, especially China and North America, is particularly affected by the tensions in container shipping. Conversely, container sea transport from AsiaPacific, primarily from China and North America to Europe and Germany, is affected by irregularities and deficits. The reasons for the tensions in container shipping are manifold: In the area of international shipping, the outbreak of the pandemic and the shutdown of large parts of industrial production worldwide resulted in numerous so-called "blank sailings", i.e. the loss of entire liner container ships to reduce capacity, in response to an oversupply of shipping space due to reduced demand. Corona-related difficulties in crew changes (due to country-specific quarantine regulations) and in ports (due to illness or quarantine) also led to staff shortages and limited handling capacity in ports, with negative consequences for international maritime transport. The market was conspicuously unprepared for a rapid restart as a result of increased demand for shipping space. In addition, there was an increased demand for container capacity for the transport of consumer goods, which rose worldwide during the lockdowns. Together with the rotational increase in demand for sea transport over the turn of the year in preparation for the Chinese New Year holidays, tensions in international container shipping, particularly between Europe and Asia/China, increased enormously with delays at ports and deficits in the quality and availability of containers - to the detriment of the shippers’ industries, which rely on transport capacity and predictable ship arrivals. Problems are expected to continue even after the opening of the Suez Canal: The backlog is shifting to the ports. Delayed clearance and even longer waiting times for ships waiting to discharge cargo at port terminals is building up additional pressure on supply chains. According to initial forecasts, the pressure in maritime transport is expected to continue into the third quarter of 2021.
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Tensions in International Container Shipping
Demands of the maritime shippers’ industry Reliable, robust international container shipping supply chains are of fundamental importance to the export-oriented maritime shippers’ industry. The aftermath of the pandemic-related outages and quality deficiencies in liner shipping is currently catching up with the industry once again. Deficits in the maritime transport market were already apparent before the Corona crisis. The BDI, therefore, has recently clearly pointed out the need for amendments that verifiably guarantee the quality of transport services and punctuality of shipping consortia in the Block Exemption Regulation for consortia in liner shipping (BER), which was recently extended by the EU Commission in April 2020. There is a lack of regulatory mechanisms to ensure deficits in quality, punctuality of ship arrivals, and availability of containers and cargo capacity. The industry is dependent on reliable maritime transport especially right now in order to avoid the rampup of the industry from stuttering again. Therefore, we urgently appeal to the European Commission to analyse the following points of the BER and to consider possible amendments to ensure quality and reliability in maritime transport so that maritime logistics chains do not suffer further damage: 1. Guaranteeing reliability: Currently, as in previous years, deficits in the maritime transport market have become increasingly apparent, indicating a declining level of competition. These include a noticeable shortage of shipping space, the failure to date to increase shipping departure frequencies, and the decline in available port pairs with direct services. In particular, there is no discernible trend of improvement in punctuality. The reliability of transport services must be better ensured. 2. Ensuring quality: Quality deficits, such as damage to containers provided and deficits with regard to the punctuality of container provision, the shortage of empty equipment and unpunctuality of ship arrivals, have a massive impact on the maritime supply chain. A review of the quality of the consortia in terms of transparency for more reliability, plannability, and punctuality is required. 3. Anchoring increase in quality and productivity legally: The central objective of the regulatory enabling of consortia formation, namely an increase in productivity and an increase in the quality of the transport service, should be set out more clearly than hitherto in the text of the BER. It must be possible to ensure plannable capacity management if the advantages of consortia formation in liner shipping are to continue to be used in a manner that is in line with competition. 4. Creating transparency: It should be possible to determine efficiently the extent to which these objectives associated with the regulation are being achieved. To this end, the Commission should prescribe uniform reporting and transparency obligations that can be fulfilled with little effort, for example by means of reports to be published regularly regarding the punctuality of arrivals on the routes operated by consortia.
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Tensions in International Container Shipping
Imprint Bundesverband der Deutschen Industrie e.V. (BDI) Breite Straße 29, 10178 Berlin www.bdi.eu T: +49 30 2028-0 Editorial Robin Kunst Senior Manager Mobility and Logistics T: +49 30 2028-1751 r.kunst@bdi.eu
BDI document number: D 1401
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