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lunes, 31 de mayo de 2010

U.S., EU Scrutinize Container Shipping Rates

Source: WSJ


BRUSSELS—A U.S. regulator and the European Union's competition watchdog are monitoring the world's top container shipping lines for any evidence of price fixing.

The scrutiny comes as the prices shipping lines charge have continued to rise even as the industry's supply of new ships has continued to increase sharply.

The shipping lines, including industry leader AP-Moeller-Maersk AS, deny they are operating a cartel.

The Federal Maritime Commission in the U.S., where carriers enjoy broad antitrust immunity, has opened a "fact finding" investigation into shipping rates. It is due to submit an interim report on June 15 and a final report on July 31.

The agency's mission is to make sure that collaboration between shipping lines does "not result in unreasonable increases in transportation costs or decreases in transportation services," says FMC commissioner Michael Khouri.

In Europe, regulators are "actively monitoring" the situation, says EU spokeswoman Amelia Torres. She declined to elaborate.

The companies that ship 20-foot or 40-foot cargo containers around the world had their worst year ever in 2009, losing an estimated $20 billion, according to Drewry Shipping Consultants Ltd. As global trade shrank by 10%, shipping lines received hundreds of new ships they had ordered during the economic boom, creating a chasm between supply and demand. For a while, rates collapsed. Analysts predicted that at least one major shipping line would have to go out of business.

That hasn't happened. Instead, shipping lines have adopted a variety of strategies to push rates back up. They have idled ships to reduce capacity and "slow steamed" to save on fuel, spending more days at sea and fewer in port, further reducing supply. Carriers say slow-steaming can cut a company's capacity by as much as 5%.

In the U.S., shipping lines have teamed up to levy voluntary rate surcharges of $400 per container. The lines say the surcharge is appropriate because no one is obligated to impose it.

The average price of moving a 40-foot container from one port across an ocean to another port increased to $2,716 in March, up more than 74% from $1,557 a year earlier. The increase is even more dramatic on some routes. For example, on shipments to Europe, the index rate has more than tripled to $3,880 from $1,071.

"The turnaround has been much swifter than expected," says Philip Damas, who follows the container shipping market for London-based Drewry.

"The mood in the industry is that things are going relatively well, but there are suspicions among importers and exporters that they've colluded," Mr. Damas says.

Shippers—the companies that arrange for space on ships—say they are struggling to find enough space at affordable prices. "We are still concerned about prices," says Nicolette van der Jagt, secretary-general of the European Shippers' Council, a Brussels-based lobbying group.

Richard Owens, a senior executive at delivery company DHL International GmbH, a unit of Deutsche Post AG, recently complained to International Freight Weekly that "we can't make the ships go faster." He said the company hopes that "one of the carriers will break ranks on speed or rates eventually."

The industry says it is doing nothing wrong. Companies have acted separately, and need rate increases to survive, says Jean-Philippe Thenoz, vice president of North America lines for France's CMA-CGM, the world's third-biggest container company by volume. "We're still far from profitability."

The crucial question for regulators will be to determine whether slow-steaming and idling ships are "a shared decision or everybody made the same decision on their own," says Drewry's Mr. Damas.

Mr. Khouri, the U.S. regulator, says that the voluntary surcharges appear to be legal, but that "discussions to agree on capacity restriction" would be a "violation of the Sherman Act."

Established in 1961, the FMC's mission is to oversee the regulatory side of shipping. President Barack Obama set a target of doubling U.S. exports by 2015, turning affordable freight prices into a political priority for his administration, say FMC officials.

Historically, shipping lines have been granted immunity to fix prices, says Mr. Damas. But the European Commission, the EU's executive arm, officially ended a price-fixing exemption for the industry in October 2008. In the U.S., shipping lines have antitrust immunity to set rates and surcharges, but aren't allowed to collude to restrict supply.

"Clearly, following the introduction of the new rules, the commission is looking for a case in the shipping sector to show it means business," says Ian Giles, a London-based lawyer for Norton Rose LLP, which specializes in shipping issues.

EU regulators are keen not to be left behind what the U.S. is doing, and have been discussing the shipping-rate situation with their U.S. counterparts, according to an official at the Federal Maritime Commission.

In February, the European commission launched an investigation into a possible cartel among freight-forwarding companies, which often rent space aboard container ships. DHL International, Panalapina Inc., Kuehne + Nagel AG, DSV AS, United Parcel Service Inc. and Expeditors International of Washington Inc. all confirmed receiving official letters from the EU announcing an investigation.

The European commission frequently follows a cartel investigation with another one in a related industry, say lawyers and officials.

Once launched, cartel investigations can take years, and result in fines if regulators find that companies guilty of collusion. The EU has stepped up its enforcement of cartel laws in recent years, hitting the auto-glass and gas industries with fines over $1 billion. Most recently, it fined memory-chip makers a total of $404.2 million.

Write to John W. Miller at john.miller@dowjones.com

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