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January 20 2020

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Januar y 20 2020 | The Journal of Commerce 17 www.joc.com International Maritime THE FIRST TASK in 2020 confronting the new European Commission appointed in November will be to decide whether its proposal to renew container shipping's exemption from competition laws for another four years should be passed with no amendments. A feedback period calling for submissions for and against the pro - posal closed on Jan. 3, and while the four-year extension will go ahead when the current block exemption expires in April 2020, the commission hasn't ruled out fine-tuning the regulation. Whether that fine-tuning will be enough to satisfy shipper organiza- tions remains to be seen. The Euro- pean Shippers' Council, which has vowed to fight the proposal, said it expects the commission "to conclude with a different decision from the current proposal." Another voice against the renewal of the Consortia Block Exemption Reg- ulation (BER) in its current form is Olaf Merk of the International Transport Forum, an arm of the Organization for Economic Cooperation and Develop- ment (OECD). In an ITF blog post in December, Merk said at the heart of unease over the BER is the fear that a cartel-like constellation might be re-emerging, with carrier alliances able to coordi- nate schedules, prices, and available capacity. A recent ITF study on liner ship- ping alliances found the cost calcula- tion models within the three global shipping alliances allowed carriers "to develop a fine sense of the costs of other carriers," Merk said. Although the BER allows for joint capacity planning for "adjustments in Ocean Network Express (ONE) has a fuel component rate of $92 per TEU, while Hapag-Lloyd, which is also a member of THE Alliance along with ONE, proposed $135 per TEU. Similarly, in the 2M Alliance, Med- iterranean Shipping Co. (MSC) was charging $71 per TEU, while fellow alliance member Maersk Line was quoting a $135 per TEU fee. "Things will probably settle, and the spread will narrow as carriers react to changes in demand, but when?" Xeneta stated. Similarly, in the Asia–Europe trade, industry analyst Alphaliner noted in December that LSFO surcharges ranged from $71 to $135 per TEU, but it could find no correlation between the average size of vessels deployed and the surcharge applied by the carriers. For their part, carriers this past year have indicated the best way for the industry to ensure the higher fuel costs are recouped is for the charges to reflect the actual spread between high-sulfur and low-sulfur fuel prices at major bunkering ports. However, when all-in spot rates are similar, but the fuel components vary signifi- cantly from carrier to carrier, the shipping public becomes wary. "This is already complex, but car- riers are making it overly complex," the former logistics executive said. JOC email: bill.mongelluzzo@ihsmarkit.com twitter: @billmongelluzzo financial services firm Jefferies said in a customer advisory. The Lunar New Year, when many factories in Asia close down for a week or two, falls on Jan. 25 this year, which is earlier than usual. US importers are therefore rushing to fulfill their shipment orders before the final vessels leave Asian ports that weekend. As space on vessels tight - ens, spot rates naturally increase. Carriers this past year have indi- cated they would have no choice but to pass on to customers most, if not all, of the increased costs they will incur by burning fuel with a sulfur content of not more than 0.5 percent. Carriers have stated repeatedly the industry's fuel bill would increase $10 billion to $15 billion annually from burning the more expensive low-sulfur fuels. Initially, carriers estimated burning LSFO would translate to an additional $150 per FEU from Asia to the West Coast and $250 per FEU on longer voyages to the East Coast. Shippers and NVOs have likewise stated for the past year they understand carrier costs were going up, but they want to ensure carriers were being transparent in how they were calculating the surcharges meant to recoup those costs. Even for carriers within the same major vessel-sharing alliances, mov- ing cargo on the same sailings, can have vastly different BAFs. According to an analysis from freight rate bench- marking firm Xeneta, for example, Come Feb. 1, trans-Pacific shippers can expect a total BAF of $1,206 per FEU to the East Coast and $717 per FEU to the West Coast, according to DSV Solutions. VladSV / Shutterstock.com Cartel concerns? New European Commission gathers feedback on liner block exemption By Greg Knowler

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