Brussels, 12 November 2020
On the 12th of November, FEPORT participated to CLECAT’s web-based annual Freight Forwarders’ Forum, under the theme “Logistics Put to Test at Times of Crisis”, which focussed on sustainable logistics, the future EU-UK relations and the need to keep global supply chains running at the time of COVID-19 crisis.
The first session of the day focused on the effects of the COVID-19 pandemic on liner shipping and in particular on the level playing field between the actors of the maritime supply chain.
In his introductory presentation, entitled “More stability and predictability in liner shipping?”, Mr Stijn Rubens, Senior Consultant at Drewry, pointed at a risk of cost and service levels spiralling out of control. Explaining the COVID-19 capacity conundrum, he noted that carriers responded to the pandemic-induced demand collapse by an unprecedented wave of blanked sailings. Whereas capacity was restored by August, there was still 6.2% less capacity in 2020 from January to October, in comparison to 2019. Overall, Drewry analysis found that the direct cost implications of service unreliability for Asia-Europe trade amounted to a 19% increase (i.e. USD 500 per container extra), in comparison to 2019. However, there were large differences in reliability between different shipping lines and alliances, emphasising the importance of measuring carrier service performance.
In the following introductory presentation, Mr Olaf Merk, Project Manager for Ports and Shipping at the International Transport Forum, questioned whether EU policies were fit for purpose given the ‘new normal’ in liner shipping, increasingly characterised by vertical integration. He argued that pure liner shipping does not exist anymore, and that shipping has become a hybrid sector. Most major liner companies had integrated other activities, including terminal operations, freight forwarding and intermodal transport, aiming to provide door-to-door service. Nonetheless, the EU regulation did not take appropriate account of this phenomenon, perpetuating special regimes for carriers in terms of competition (i.e. Consortia BER) and thus allowing for joint capacity management, negotiation with suppliers and information exchange on volumes moved, average revenue per TEU earned, demand and supply forecasts, reference costs per service or trade.
The other sphere of preferential treatment of carriers related to state aid and taxation benefitting vertically integrated shipping companies, at the cost of forwarders, and creating incentive for carrier haulage instead of merchant haulage. The inclusion of certain ancillary activities in tonnage tax schemes creates market distortions throughout the EU.
Mr Jens Roemer, Managing Director at a.hartrodt, representing the freight forwarding voice in the panel, noted that due to the current crisis the maritime supply chain had become extremely unreliable, and it appeared that the world trade was at the mercy of a few major shipping lines. He warned that the ‘new normal’ must come to an end as soon as possible and encouraged all stakeholders to work together by entering into a regular dialogue to make sure that the maritime supply chain becomes once again more reliable, predictable and resilient. Mr Roemer also stated that the privilege of the Consortia BER protection for shipping lines to exchange information and data was being used to compete with the forwarding industry on land-based services, with the latter unable to rely on similar protection. The development of vertical integration and digitalisation demonstrated clearly that the current competition rules were no longer fit for purpose. Moreover, the purpose and use of state aid must also be looked into, noted Mr Roemer, as funds made available to carriers may be used for investments in the land-side supply chain, allowing carriers to compete with forwarders, who may not have access to similar funds.
Mr Pyers Tucker, Senior Advisor Corporate Development at Hapag Lloyd, agreed with Mr Roemer that it was in the interest of all stakeholders, carriers included, to return to a more stable and reliable liner shipping market. The most worrying question was for how long the COVID-infused disruptions would continue into the future, considering that governments would be less and less able to keep supporting consumer spending. Therefore, the uncertainty about demand going forward into the next year had never been higher, he remarked. With respect to the vertical integration concerns, Mr Tucker believed that carrier attempts to expand into other sectors was a big strategic mistake, explaining why Hapag Lloyd was not going down that path and concentrating purely on ship sailing.
Ms Lamia Kerdjoudj-Belkaid, Secretary General at FEPORT, questioned the decision of the European Commission to prolong the Consortia BER and therefore the privileges for the shipping lines, as there was no data collected to see what the impact was on other parties in the chain, including the port services, terminals and freight forwarders. She expressed hopes that the review should start as soon as possible, especially in terms of data collection.
The second panel focused on the future economic partnership between the EU and the UK. It appears clear that free movement of goods between the EU and the UK will be disrupted regardless of whether a deal is reached between the parties; this will have severe consequences for freight traffic rendering customs formalities, potential levying of customs duties and non-tariff trade barriers unavoidable.
The third session focused on the reduction of emissions from logistics operations. The European Commission’s comprehensive long-term vision for 2030 and 2050 was presented, and participants identified the biggest challenges for SMEs in their journey towards decarbonisation and the needed forms of support for evolving customer demand and legislation.
Finally, during session four, panellists exchanged on the challenges which the air freight industry has been facing since the beginning of the COVID-19 pandemic. It was highlighted that in light of the upcoming COVID-19 vaccines, air freight will likely shoulder a high portion of global traffic for the coming years. The industry would therefore need to be prepared for the import of vaccines, as well as for guaranteeing the necessary capacity, even at times of crisis.
Source: FEPORT and CLECAT