Nothing seems able to disturb the tight capacity control strategy which has been exercised by the top ten shipping companies since the Chinese New Year on east-west trade routes. As a result, freight rates are holding up at high levels despite the fall in global demand.
It has taken the Covid-19 epidemic to make us fully aware of the concentration which took place in 2017, when the three major container international shipping alliances were set up.
Despite the fall in demand, no member of any of these alliances has so far dared to embark alone on a trade war, which has had the effect of artificially blocking the market at high freight rate levels. The Shanghai-Antwerp line provides a clear illustration.
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- The Shanghai-Antwerp line
Controlling capacity “whatever the cost”
Those with suspicious minds might be tempted to see this capacity control as collusion. We consider that this is not at all the case. In the first place, breaking competition rules would be to play an extremely dangerous game, attracting the risk of fines of millions of dollars for any company found guilty. Secondly, any other capacity policy would be quite simply suicidal. There is no third way. Companies either continue as they are or start a trade war that no one wants or can afford to contemplate at this time.
Shipping companies are therefore maintaining discipline to get them through the tempest provoked by Covid-19. They restrict the availability of space aboard ship “whatever the cost”, to borrow a phrase used by French president Emmanuel Macron when he announced the start of lockdown in France. The companies prefer to add space when necessary with surgical precision and, if possible, after goods have already been “captured”, which is to say when they are sitting at the departure terminal to be loaded. But the fact that everyone is showing the same sense of discipline does not mean that there is any collusion. It is important to explain this nuance before pursuing.
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