Thursday, September 6, 2012

Container Shipping Lines Take Different Views Whilst Freight Services Come Under Strike Threat

Economy and Culture Make Routes from Asia to Europe and the US Different Animals
Shipping News Feature

US – ASIA – EUROPE - As we predicted last November there are signs that the number of vessels parked in bays, fjords and lochs around the world has increased over the past months as the excess capacity in new builds continues to bite. During that time many companies have cut their losses to some extent by scrapping a larger than normal proportion of older fleets to mitigate the fall off in freight but such tonnage is of course finite. Shipping intelligence agency Alphaliner estimates the capacity of the world’s ocean cargo fleet lying idle in July at over 460,000 TEU as the container shipping lines negotiate the vessel oversupply and this despite slow steaming having become now an industry standard on many trade routes in an attempt to keep ships reasonably fully loaded.

The two obvious markets for the box carriers, transpacific and transatlantic, are never as easy to analyse or compare as some pundits would pretend but the signs are that growing confidence in America has begun to affect not only the attitude of the consumers but also the carriers and those directly affecting the Asian supply chain. Whilst Europe generally is facing the future somewhat pessimistically, with retailers taking the pain as people hang on to their money concerned that the worsening employment situation may affect them directly, the story in the US is somewhat different.

Port workers across the country seem to be viewing the analysts' opinions, which generally predict a slight growth in the economy, as a reason to press for increased wages. Talks between the International Longshoremen's Association (ILA) and the U. S. Maritime Alliance (USMX) in Virginia have collapsed and a strike is threatened to commence on the 1st October. Meanwhile the same union has stated that a similar situation will arise across ports as diverse as New York, Houston and Boston unless demands for more pay are met by the USMX which negotiates for employers in the Eastern US and Gulf ports.

Whilst there has been a widespread unrest in some of the Eurozone countries, notably Greece and Spain as dock workers have been involved in wage disputes, these tend to be part of countrywide dissatisfaction with the particular Governments rather than cargo handling specific. Relations between the ILA and USMX are at a low ebb with name calling on both sides. The ILA says that the USMX has ‘destroyed years of cooperation and trust’ by demanding the union drop the eight hour guarantee which the dockers have had in place for years. Management point out abuse to the system referring to ‘archaic work rules and manning practices, and the system of guarantees and overtime pay practices that result in millions of dollars being paid for time not worked’. Basically they are contending that the practice of paying a port worker a minimum of eight hours overtime for any extra period of labour is crippling some ports which have become prohibitively expensive, a topic the ILA absolutely refuses to discuss.

Meanwhile the container carriers are increasing their own rates in a range of regions at the moment as they attempt to return to long term profitability whilst the Asia – Europe tariffs have proved more susceptible to negotiation downward, with cuts made to several services as oversupply increases the competition for cargo and reduces the tonnages, and therefore revenue, applicable to each vessel.

The next month will see a further round of freight rate rises on the transpacific services with talk of $800 surcharges for every twenty foot box coming on stream due to various factors including port congestion, a situation which could worsen considerably if the threatened US industrial action does happen and possibly spread. Like their bretheren overseas the US unions know that their best chance of applying pressure is the run up to Christmas, whilst in Europe this year most are more concerned with the possibility of half empty ports rather than an overflow of freight.

Photo: The Longshoreman’s Noon by British born John George Brown painted in New York in 1879 described as, ‘more a study of character and community than an exploration of the often harsh realities of life on the docks’.