Executive Briefings

Anger Between Shippers and Carriers Hits the Boiling Point

The acrimonious relationship between shippers and ocean carriers appears to be nearing an all-time low. At one of the container shipping industry's biggest annual events, the Trans-Pacific Maritime Conference in Long Beach, Calif., in March, shippers and carriers unleashed verbal barrages at one another that left the audience buzzing. That the attacks came in sessions that were intended to build toward a more productive 2010 just underscored how fragile relations are as annual contract negotiations approach.

But the vitriol should have come as little surprise. Tensions have been building for months, ever since carriers took a determined approach to hauling themselves out of the depths of 2009.

What has rankled shippers of late is a three-pronged undermining of their businesses:

• Rates have been rising at pace as carriers try to quickly make money from transporting containers.

• Ships are slowing down as carriers try to cut down on fuel consumption and soak up excess capacity.

• Most problematic, cargo leaving Asia has been consistently bumped due to a demand surge that has left capacity at a premium. It's a surge that carriers said they didn't see coming, but one in which shippers say as much as 30 percent of their volume leaving Asia has been rolled onto later sailings.

Those three issues have conspired to send shippers into a rage, none more so than Bjorn Vang Jensen, vice president of global freight and logistics services for Electrolux.

"We know there are issues on the carrier side," said Jensen at the conference, sponsored by the Journal of Commerce. "But this completely unexpected volume surge? There are 2,000 years of shipping experience in this room and nobody figured out that the Chinese New Year fell later than normal this year? And restocking started in October. I don't buy that you couldn't deploy capacity. I do buy that you didn't want to deploy the capacity."

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The acrimonious relationship between shippers and ocean carriers appears to be nearing an all-time low. At one of the container shipping industry's biggest annual events, the Trans-Pacific Maritime Conference in Long Beach, Calif., in March, shippers and carriers unleashed verbal barrages at one another that left the audience buzzing. That the attacks came in sessions that were intended to build toward a more productive 2010 just underscored how fragile relations are as annual contract negotiations approach.

But the vitriol should have come as little surprise. Tensions have been building for months, ever since carriers took a determined approach to hauling themselves out of the depths of 2009.

What has rankled shippers of late is a three-pronged undermining of their businesses:

• Rates have been rising at pace as carriers try to quickly make money from transporting containers.

• Ships are slowing down as carriers try to cut down on fuel consumption and soak up excess capacity.

• Most problematic, cargo leaving Asia has been consistently bumped due to a demand surge that has left capacity at a premium. It's a surge that carriers said they didn't see coming, but one in which shippers say as much as 30 percent of their volume leaving Asia has been rolled onto later sailings.

Those three issues have conspired to send shippers into a rage, none more so than Bjorn Vang Jensen, vice president of global freight and logistics services for Electrolux.

"We know there are issues on the carrier side," said Jensen at the conference, sponsored by the Journal of Commerce. "But this completely unexpected volume surge? There are 2,000 years of shipping experience in this room and nobody figured out that the Chinese New Year fell later than normal this year? And restocking started in October. I don't buy that you couldn't deploy capacity. I do buy that you didn't want to deploy the capacity."

Read Full Article (requires registration)