Alliance Booking Crunch Disrupts Supply Chain

European Shippers’ Council (ESC) members report that many shippers who regularly export goods to Asia have been facing a large drop of available slots for containers on almost every shipping line.

The main reason given by carriers of the two new alliances is the reshuffling of their organization and the repositioning of their ships to start their new services next month. 

The ESC reports that M2 alliance has stopped accepting freight from customers of competitors turning to them because of the shortage of capacity encountered.

Shippers are confronted with heavily damaging situations, the ESC says, ranging from breeching of contractual commitments by some liners to impossibility to get boarding slots before May. This can result in fluctuating freight rates, with instant hikes of up to 45 percent to firm up a booking. Alternatively, it can mean missed sales, stock failure and significant extra costs, as some exporters are trying to circumvent these obstacles by using other transport modes.

The ESC warned that problems might occur after the Chinese New Year, because 60 percent of the capacity on some lanes would be rearranged, but the magnitude of the turmoil was unexpected given the overcapacity of the market. 

“This disorder has a significantly more serious impact that the one caused by the installation of the previous alliances two years ago,” said the ESC in a statement. “It also comes only eight months after the very severe consequences of Hanjin bankruptcy.”

The ESC is calling for carriers to take their responsibility and give an accurate display of the present situation and of its cause, while making sure that everything goes back to normal in the coming weeks. 

The ESC also wants authorities to recognize the current market structure where three major alliances control close to 90 percent of the capacity on the major trades. “Despite carriers not violating any present regional regulation on competition, the combination of a high concentration of players and a recurrent instability within the alliances induces a much higher risk of making this kind of market disruption frequent and significant. This is demonstrated today by the ongoing recombination of partnerships two years after the establishment of the previous alliances which were supposed to be set for five years.”

Shippers’ representatives have again called for the maritime industry to initiate a constructive dialogue with them and other stakeholders. The objective of such a dialogue would be to create the framework for a sustainable market where the liners’ offers would meet the shippers’ expectations of service quality, continuity and predictability. Shippers have not triggered the conditions which make the market so volatile today, and they are certainly ready to trade some of the price advantage they got in the past years against this sustainability, says the ESC.