2019 State of Logistics: Ocean cargo

Analysts for the Federal Maritime Commission’s (FMC) Office of Economics and Competition Analysis maintain that there’s scant evidence of diminished competition among ocean cargo carriers despite the growing market share of new shipping alliances.

The FMC also observes that freight rates—as measured by the Shanghai Containerized Freight Index and Chinese Containerized Freight Index—are lower than in past years, especially when adjusted for inflation.

In the hotly contested trans-Pacific lane, the Ocean Alliance of COSCO/OOCL, CMA CGM and Evergreen has a 42.2% share of the container trade. The 2M Alliance of Maersk and MSC along with partner Hyundai Merchant Marine has a 25.4% share and THE Alliance of ONE, Hapag-Lloyd and Yang Ming weighs in with a 25% share. In the trans-Atlantic container trade, 2M is dominant with a 39.8% share, while THE Alliance has a 29% share and the Ocean Alliance has a 20.7% share.

FMC chairman Michael Khouri says that he meets with the alliances on a semi-annual basis and prepares standardized quarterly reports on them. “We review the minutes of meetings by alliance members, canceled sailings and capacity projections by the alliances and trade consultancies,” he says. The FMC also performs two types of statistical tests of average revenue data as “a proxy” for prices to determine if there are statistically significant differences from month to month and then tries to find out the reason for the trend.

“For example, eastbound trans-Pacific rates rose late last year as shippers advanced cargo bookings in the face of increased and threatened increases in U.S. tariffs on Chinese goods, while westbound trans-Pacific rates fell because of restrictions put in place by China on imports of scrap commodities from countries such as the U.S.,” Khouri says.

Finally, the FMC also looks after the interests of shippers by conducting a variety of statistical tests to see if carriers are pricing independently or colluding within or across alliances or across the industry.

Another agency just as vigilant in protecting shippers is the Coalition for Responsible Transportation (CRT), which recently noted that while it supports the development of greenhouse gas reduction goals being developed by the International Maritime Organization, it’s opposed to mandated speed restrictions for ships.

“Any use of slow steaming should be done on a voluntary basis through the marketplace between the business interests involved,” says Stephen Cadden, the group’s executive director. “Without a recognition of the complete supply chain, mandated speed restrictions for all vessels at sea will be counterproductive.”

CRT members include Amazon, Best Buy, BigLots, Home Depot, Lowe’s, HP Inc., Target, the Retail Industry Leaders Association, port authorities as well as transportation and logistics providers such a BNSF Railway, NFI, and GSC Logistics.

Read the feature article on the 2019 State of Logistics here.