ITCO warns liner operators off

MIND YOUR OWN BUSINESS

SHIPPING • MARKET POWER HAS RECENTLY SHIFTED STRONGLY TOWARDS THE CONTAINER SHIPPING LINES. ITCO IS CONCERNED ABOUT WHAT THIS MIGHT MEAN FOR TANK CONTAINERS

CHANGING TRADE PATTERNS have shifted the centre of power in the market away from shippers and towards the deepsea container shipping lines. Their new-found wealth is encouraging them to invest up and down the supply chain and, as Reg Lee, president of the International Tank Container Organisation (ITCO), says in an open letter to members – reproduced here with permission – that raises the spectre of the lines muscling in on the tank container business. It has happened before, Lee says, but did little to help the business.

“Significantly increased freight rates have enabled container shipping lines to generate huge profits over the past two years. In turn, these profits have permitted shipping lines to diversify their business – through expansion and acquisition. No longer just container carriers, some are rapidly evolving into ‘logistics’ companies – providing door-to-door services for beneficial cargo owners and potentially taking over business currently handled by forwarders and specialist equipment operators. This means that they can offer containers for all types of cargo – including bulk liquids.

Inevitably, this trend towards providing a ‘full logistics service’ has led to some speculation that shipping lines could now be looking at introducing tank containers into their container fleets – and offer business services directly to the shipper.

There are very few things that are ‘new’ in our industry – and I am old enough to remember the times when tank containers did form part of the container fleets of some container shipping lines.

The problems this created were significant, mainly because they tended to treat the ISO tank operation as if tanks were standard equipment – by including tanks in their standard operations and procedures, without making sufficient investment in the expertise and systems that this specialist operation requires.

Moreover, the lines also made the error of ‘costing’ the tanks as if they were standard equipment, which not only significantly damaged the tank operating industry, but also brought about significant cost damages to the lines themselves. This, ultimately, led to them jettisoning this part of their business and leaving the tank container industry to pick up the pieces and clear up the mess - whilst also trying to recover our rates to a sustainable and realistic level.

One of the major shipping lines even asked Stolt Tank Containers to take over its tank operations and make it viable – and, eventually, STC took over operational responsibility. The lines also imposed an anti-competitive surcharge for shipper-owned equipment of about $150 a tank – and that was over 30 years ago!

My opinion is that without continuity and proper transition of experience within the shipping industry, the ‘new generations’ could easily repeat the same mistakes that they made in the past, unless they are guided and advised accordingly.

It is quite possible that shipping lines are ignoring the lessons of the past and could easily make the same mistake again. It is not in the interests of the tank container industry to assist them do this – nor should we give them our help, approval or blessing.”

ITCO IS CONCERNED THAT LINER OPERATORS WILL

REPEAT THE MISTAKES THEY MADE BEFORE

Reg Lee President, ITCO