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Penalties for FCL booking cancellations

In recent months, shipping liners including Maersk, CMA CGM, and Hapag-Lloyd have begun implementing “no-shows fines” on shipments that fail to show up on vessels, including booking cancellations or transfers made less than seven days before the sailing date.

Under the current implementation, the booking party is responsible for paying this fee, with potential implications for intermediaries such as freight forwarders.

The fines are aimed at cost compensation for what is reported to be a significant issue. Hapag-Lloyd estimates that globally around a quarter of its bookings fail to load as a result of no-shows.

This isn’t the first time liners have tried to introduce penalties for FCL cancellations however in the face of carrier consolidation with fewer carriers to choose from, the likelihood of these fees gaining traction has greatly increased.

 

More container shipping M&A activity expected as smaller carriers try to keep up

Commentators note a “high likelihood” of a new wave of M&A activity involving medium-size ocean carriers, as the gap widens between them and the largest container lines. Independent maritime research consultancy Drewry notes that the top three container lines now enjoy a massive 42% dominance of the global container market, which compares with the 26% share held by the top three carriers in 2005.

Drewry notes that CMA CGM’s acquisition of APL, the merger of Cosco and CSCL, Hapag-Lloyd’s merger with UASC and the forthcoming takeover of Hamburg Sud by Maersk has resulted in a widening of the chasm between the big players and their mid-sized peers. “Inevitably, as the gap between the leading seven carriers and everyone else gets wider, speculation will mount about whether the smaller players can keep up and remain cost-competitive,”.  Drewry also notes that one consequence of the rush of M&A activity over the past two years was that shippers now had fewer and fewer options when booking container space. “This was the “unfortunate price” to be paid for years of sub-economic rates that had forced carriers to “seek safety in numbers”, it said.

 

Shipping Industry Unites To Propose Ambitious CO2 Reduction Objectives

Four major international trade associations have made a joint proposal to the UN International Maritime Organisation (IMO) concerning ambitious CO2 reductions by the international shipping sector. The IMO Marine Environment Protection Committee is scheduled to meet in July to begin the development of a strategy for the reduction of the sector’s CO2 emissions aligning the international shipping sector response to the 2015 Paris Agreement’s call for ambitious contributions to combat climate change.

In a detailed submission, the industry bodies have proposed that IMO Member States should immediately adopt two Aspirational Objectives on behalf of the international shipping sector:

  • To maintain international shipping’s annual total CO2 emissions below 2008 levels; and
  • To reduce CO2 emissions per tonne of cargo transported one kilometre, as an average across international shipping, by at least 50% by 2050, compared to 2008.

In addition, the industry associations have suggested that IMO should give consideration to another possible objective of reducing international shipping’s total annual CO2 emissions, by an agreed percentage by 2050 compared to 2008, as a point on a continuing trajectory of further CO2 emissions reduction.

The industry associations assert that it is important for IMO to send a clear, unambiguous signal to the global community that shipping’s regulators have agreed to some ambitious objectives for reducing the sector’s CO2 emissions, in the same way that land-based activity is now covered by government commitments under the Paris Agreement.

The shipping industry wants IMO to remain in control of additional measures to address CO2 reduction by international shipping and to develop a global solution, rather than risk the danger of market-distorting measures at the national or regional level.

Importantly, the industry submission emphasises that any objectives adopted by IMO must not imply any commitment to place a binding cap on the sector’s total CO2 emissions or on the CO2 emissions of individual ships.

 

Grappling with the 2020 marine fuel sulphur requirements

The IMO decision on 2020 marine fuel sulphur requirements is clearly a call to action for the industry. Under the new global cap, ships will have to use marine fuels with a sulphur content of no more than 0.5% against the current limit of 3.5%S in an effort to reduce greenhouse gas emissions. (The Emission Control Areas (ECAs) will remain at the 2015 standard of 0.1%S content.)

Ship owners will soon need to decide if they want to continue using high sulphur fuel oil, in conjunction with scrubbers or exhaust gas cleaning systems; or switch to low sulphur fuel options, including distillates; or virtually sulphur-free LNG fuel.

For fuel suppliers, it appears that even if EGCS are chosen by some operators, there will still be a very substantial increase in demand for very-low-sulphur marine fuels, and a corresponding reduction in demand for high-sulphur fuel oil (HSFO).

From shippers there is an emerging call that the regulation must be implemented consistently across the global industry, in order to maintain investment confidence and support fair competition.

This has been recognised by the IMO, which has initiated the development of a new output to promote consistent implementation of the 0.5% sulphur standard, and is considering wide-ranging actions to enforce global compliance.

 

Global shipping feels fallout from Maersk cyber attack

Global shipping is still feeling the effects of the cyber attack that hit Maersk, showing the scale of the damage a computer virus can unleash on the technology dependent and inter-connected shipping industry. The cyber attack was among the biggest-ever disruptions to hit global shipping, and while in New Zealand Maersk operations were maintained and run to schedule, that was not the case elsewhere.  The impact of the attack on the company has reverberated across the industry given its position as the world’s biggest container shipping line and also operator of 76 ports via its APM Terminals division. While too early to fully assess the financial impact some commentators have estimated the impact of the attack might cost the Maersk group more than USD 50 million in lost freight and bookings.

 

Integration of K Line, MOL and NYK container shipping businesses

Japanese shipping lines K Line, MOL and NYK have announced that the integration of their container businesses is still going to plan, despite missing the previously announced 1 July establishment target for the new Ocean Network Express (ONE) brand and the announcement from the South African Competition Commission that it had refused the merger, alleging that the transaction was “likely to increase the scope for coordination in the container liner shipping market, while creating a platform for coordination in the car carrier market”.

The statement this week from the Japanese carriers notes that the new company has “received all necessary approvals for compliance with local competition laws in regions and countries where compliance is required and progress is being made towards completing the establishment of the new integrated container shipping business. The service commencement date for the new commencement date is “unchanged from 1 April 2018”.

The merger into ONE will integrate K Line, MOL and NYK’s container businesses and global terminals, except those in Japan. 

 
 
 
 
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