11. mariLOG Conference: How to fix the carrier-shipper relations?

The 11th international conference for maritime logistics (mariLOG) took place on May 4th, 2021 – as part of the online event of transport logistic 2021. Transport logistic is regarded as the leading trade fair for logistics, mobility, IT and supply management. In 2019, 2374 exhibitors and around 64,000 visitors from 125 countries gathered at the on-site event. This year, the fair is held as a purely digital event.

The mariLOG conference took place as a panel discussion between high-ranking market participants on the following topic: How can we fix what Corona has done to the relationship between carriers and their customers.

The corona pandemic is putting a strain on the relationship between carriers and their customers. The latter have complained that shipowners have used their market power inappropriately to drive up freight rates. In addition, there is a lack in contractual loyalty and service quality. The shipowners, in turn, point to the collapse in demand in the wake of the pandemic and to capacity increases on the main trade routes. What needs to be done to improve the relationship between the parties?

Looking back on 2020/2021 in container shipping

The panel discussion was hosted by DVZ – Deutsche Verkehrszeitung (German Traffic Newspaper). The managing director of Alphaliner Jan Tiedemann reviewed the years 2020/2021 with regard to the developments in container liner shipping and opened the online event as keynote speaker. Q1 2020 was shaped by the new IMO regulations to reduce sulfur dioxide emissions in shipping. From the second quarter, the spreading pandemic determined the shipping industry. There was a slump in shipping due to falling demand and the shutdown in China, which, with a time lag, also shifted to Europe and the USA. “No push” from China became “no pull” from Europe and the USA. There was also an increase in blank sailings around the world. This first pandemic-shaped phase was followed by a one with contrary developments from Q3 onwards. Due to the limited mobility around the world, there was a shift in prevailing interests. A completely new consumer behavior led to a boom in e-commerce and an increased demand for goods, which had a huge impact on shipping volumes.

Key factors influencing the relation:

Capacity

Averaged over 10 years, a significant increase in carrier capacities can be observed in all areas.

Employment situation of the container fleet

In 2020, the proportion of unemployed ships was very high compared to the last 10 years, caused by shipyard times that were necessary, for example, for the installation of scrubbers, but also by Corona. Usually, the employment situation of the container fleet is an indicator of the market situation – in 2020 it wasn’t though, due to Corona. This situation was stressful for the carriers.

Shanghai Containerized Freight Index (SCFI) / Freight Rates

The freight rates are extremely high at the moment. They have risen tremendously over the last year. The more capacity / tonnage is required, the more expensive the freight rates become. The charter market is practically empty. In addition, container liner shipping has been affected by a shortage of containers for a long time.

Carrier EBIT / Margins

Until 2019, the business for carriers hasn’t been lucrative due to e.g., high bunker costs and high investment costs. This has changed since 2020 because of the high freight rates, which enabled the carriers to significantly increase their margins.

After the keynote, the panel discussion was opened. The problems mentioned were confirmed by Poul Hestbaek, the new managing director of the Port of Hamburg Süd. The container ships are fully utilized and the freight rates are extremely high, especially for short-term charters. Hestbaek criticizes the carriers for their reliability. It happens that secured seats are sold to customers which later are canceled. This also puts a strain on trust in the carriers.

As a representative of the carriers, Bodo Knop, managing director of the shipping and purchasing company Xstaff, replied that the carriers had challenges to overcome on their side, too, for example, the increased occurrence of double bookings (“dummy bookings”) by customers with different carriers in order to secure the shipment of their cargo at the desired time. This procedure would lead to capacities remaining unused which exacerbated predictability for the carriers and causes additional tensions between the shipping companies and the carrier.

For Jan Harnisch, the COO of the forwarding company Rhenus Air & Ocean, the most important thing is to improve the weekly forcasting in order to improve the relationship with the carriers and to be able to regain trust. Knop emphasizes how important it is that both carriers and shipowners stick to the commitments.

Knop hopes that those involved will focus on long-term relationships rather than pricing. In his view, the pandemic will lead to a consolidation of the market for freight forwarders and carriers, too.

As a final remark, Tiedemann states that he supports the increased income of the shipping companies who profit from the situation as well as the carriers because shippers would need the additional money to make urgently needed investments to meet the requirements for „greener shipping“. For example, an LNG-powered vessel would cost $30 million more in acquisition.

Summary

All parties involved agree that communication between carriers and customers must be improved and made more transparent in order to ease tensions.

In summary, it can be said that the developments and problems in container shipping have been exacerbated by Corona and that all parties are dissatisfied with the current situation. Stable freight rates and a reliable forecast provided by the carriers are the basis for strengthening the relations. The question of how the relationship between the carriers and their customers could be improved was only rudimentarily addressed in the discussion and remained largely unanswered.

Read a summary of the 10. mariLOG conference 2019 when the upcoming IMO regulations on sulphur oxide emissions were discussed.