The EU decided to suspend the exemption; the red light period of Indonesian customs was brought forward; the Arctic route challenged the Suez Canal | Foreign Trade News Express
The EU decided to suspend the exemption, and shipping companies collectively suffered a huge blow!
From next year, large container shipping companies will no longer enjoy exemptions from European competition rules.
The European Commission said on Tuesday that the Community Block Exemption Regulation (CBER) no longer promotes competition in the shipping industry and will not be extended after it expires on April 25, 2024.
This means container shipping companies will lose special antitrust exemptions that the European Union has forged to reduce freight costs.
That’s a blow to shipowners who have long relied on sharing vessel capacity to prop up profits.
Industry complained that the EU decision would create uncertainty for companies that transport most of the $25 trillion in annual goods trade.
While the decision itself does not end cooperation among shipping groups, it has the potential to upend the global trade business, which has become increasingly dominated by a handful of container shipping companies that control much of the market through so-called alliances.
After the announcement, share prices of European container shipping companies fell.
EU cartelization rules generally prohibit agreements between companies that restrict competition. But the so-called Consortium Block Exemption Regulation (CBER) allows container carriers with a combined market share of less than 30% to enter into joint liner shipping cooperation agreements under certain conditions.
"For many years, shipping companies operating on the main routes between Asia and Europe have benefited from CBER, allowing them to form alliances and share information and space on each other's ships. However, after reviewing the impact of the rule on competition since August 2022, the European Commission has now decided not to extend the exemption, considering that CBER's effectiveness and efficiency are low or limited.
According to the statement of the European Commission, the expiration of CBER does not mean that cooperation between shipping companies is illegal under EU antitrust rules. Shipping companies entering and leaving the EU will assess the compatibility of their cooperation agreements with EU antitrust rules based on the guidance provided by the Horizontal Block Exemption Regulation and the Specialized Block Exemption Regulation.
But the move also dealt a severe blow to the shipping industry.
This is a critical time for container carriers, whose profits have plummeted after consumption weakened during the pandemic, as a boom in online shopping and congestion at port locks caused demand to outstrip supply.
“This is a really big deal,” said Mike Garratt, director of shipping consultancy MDS Transmodal, whose research informed the commission’s decision. “You have nine companies that appear to be almost breaking the law and controlling a large portion of the value of world trade. This has huge implications for the deep-sea shipping industry.”
The world’s nine largest container shipping lines, several of which grew by acquiring smaller rivals, have formed three separate alliances over the past decade, enabling them to control supply and rein in shipping costs at a time when profitability is low.
But profits soared when freight rates rose to record highs during the pandemic, angering customers who faced severe delays in getting goods in and out of ports due to congested ports.Data from consultancy Drewry shows that in the three years to 2022, container shipping groups will make as much profit as in the past 60 years combined.
Still, the world’s two largest container lines, A.P. Moller-Maersk A/S and Mediterranean Shipping Co., said earlier this year they planned to end their alliances on their own in 2025 due to a shift in strategy. Other container lines, including Hapag-Lloyd AG, have said they plan to stick with their own consortiums.
The European Commission's decision has been resisted by the shipping industry, which is also facing increasing pressure in the United States, where U.S. President Joe Biden pledged last year to "crack down on ocean carriers whose price increases hurt American families."
In this regard, many industry insiders said: "The good days of shipping companies are over."
As U.S. and European consumers scale back purchases, ship freight rates have fallen sharply. Daily market prices for shipping from Asia to the U.S. and Europe plunged by as much as 90% in September from the beginning of 2022. Major carriers such as AP Moller-Maersk and CMA CGM are responding by canceling sailings and mothballing ships to cut operating costs.
The reduction in shipping activity is affecting large retailers, benefiting from lower rates but resulting in a 7% reduction in container capacity in September compared with last year, according to the Wall Street Journal. U.S. consumer confidence fell to a four-month low, reflecting concerns about rising prices and a potential recession.
The average daily freight rate from Shanghai to Los Angeles has dropped sharply as the container throughput at the ports of Los Angeles and Long Beach has decreased. As the spot market collapses, large shippers are renegotiating long-term contracts, and reports show that ocean freight costs for major retailers have fallen by 45% this year.
Shipowners are rerouting vessels to the East Coast to stimulate business. This has made shipping costs for US importers from Europe the lowest in years. However, the future remains uncertain, with more container ships expected to be delivered, helping to increase overall fleet capacity.
Liner companies are now considering strategies such as aggressive demolition and delaying newbuilding to cope with the challenges posed by overcapacity and weak demand.
Attention for shipment! Indonesian customs issues red light in advance
- On October 8, Indonesian Customs issued a notice to tighten the flow of imported goods;
- On October 6, foreign media reported that Shopee launched the COD Cek Dulu function;
- On October 4, TikTok Shop Indonesia was closed; Shopee announced that it would officially stop selling products from abroad (cross-border);
- On September 27, the Indonesian government issued regulations prohibiting transactions in TikTok Shop; Shopee issued a notice to temporarily close 3PF overseas warehouses;
The upcoming change of the Indonesian president has caused a red light for Indonesian customs. The Surabaya Port has not yet ended, but the Jakarta Port is about to start. Following the mobilization meeting on October 4 to rectify e-commerce, President Joko Widodo issued an order to the Minister of Trade on October 6 to strictly restrict the import of 9 categories of goods; these 9 categories of goods include;
- Consumer Electronics
- shoe
- cosmetic
- textile
- Traditional medicine
- Health Products
- clothing
- accessories
- Luggage
Any business engaged in foreign trade activities in Indonesia will inevitably encounter the Indonesian Customs' Red Light Period every year. Usually from December to March every year, it is the Indonesian Customs' Red Light Period that makes many logistics and foreign trade people terrified.
The last time was quite serious; the real red light period was in the second half of 2017; the Indonesian red light period is caused by many factors, not only the Indonesian government's efforts to strengthen customs tax collection, but also the changes in senior Indonesian customs personnel, who use the customs red light period model to assert their rights and gain benefits;
Of course, a very important reason is that the Indonesian authorities set corresponding non-tariff thresholds for imports and exports in order to adjust the market's trade deficit and maintain local market share; it is also a targeted crackdown on drugs and terrorist materials.
But no matter what the reason, Indonesia's red light period has caused trouble for many businesses engaged in foreign trade activities.
Indonesian customs inspections are even nitpicking, and every box must be opened for inspection. The overall shipping efficiency of the market will slow down during the red light period, mainly because the inspection rate is high, the inspection is stricter than usual, more cabinets are inspected, and the terminal is blocked, which affects the speed of inspection and release.
Airlangga further mentioned that the Indonesian government is working closely with relevant departments and the Food and Drug Administration (BPOM) to amend and improve existing regulations to adapt to the new import policy.
The background of these policies isBecause the local government of Indonesia protects local enterprises, imported products flooded the local market, causing the local market to become increasingly deserted, while imported products on e-commerce platforms were selling like hot cakes.
In addition, the Indonesian government also supervises general importers, and the relevant regulations have changed from post-border execution to pre-border execution, and deepened the pre-border reception steps to maintain service level agreements and response speeds, so as not to increase detention time. Pre-border supervision of prohibited or restricted goods refers to supervision by customs personnel in the customs area, while post-border supervision refers to supervision by relevant departments or agencies of goods that have left the customs area and are already in social (free circulation/market) circulation.
Indonesia is the country with the best detention time after Singapore, which refers to the time from when a container is unloaded from a ship to when the cargo leaves the port, at 3.2 days.
China is Indonesia's largest trading partner, so the most affected by the Indonesian customs red light period is China's trade activities.It is recommended to arrange in advance and extend the delivery time. Legal and compliant shipments are easier to clear customs.。If you have any related needs, please consult Huifeng International. We have rich experience and can provide you with professional logistics solutions to help you pass customs faster and safer.
2M Asia to Northern Europe loop route suspended
2M Alliance partners MSC and Maersk will resume reducing their “winter schedule” coverage from Asia to North Europe until December to mitigate the impact of falling demand and continued declines in freight rates on the route.Starting from the end of this month, the 2M Asia to Northern Europe loop will be suspended for seven weeks.
MSC said it was taking steps to adjust capacity to accommodate slower demand on the Asia to North Europe trade, while Maersk added its overall aim was to “provide predictability for our customers and ensure minimal disruption to their supply chains by offering alternative routes and coverage for affected vessels”.
MSC said that as an alternative for bulk shippers, it could offer calls at other Nordic ports that are not on the blank loop.
Specifically, MSC and Maersk’s Griffin/AE55 service will be suspended in weeks 43, 45 and 48, the Condor/AE7 service will be suspended in weeks 44 and 46, and the Lion/AE6 service will be suspended in weeks 47 and 49.
It turns out thatThe large-scale blank sailing plan implemented by shipping companies on the Asia-North Europe route during the Golden Week failed to effectively slow down the trend of falling freight rates, resulting in a drop of up to 50% in freight rates in September.
also,Hapag-Lloyd, CMA CGM and others announced last week that they would significantly increase FAK rates from November 1, but the impact has been minimal so far.
Meanwhile, newbuilding containerships are flooding the market at the worst possible time. Some 190,000 TEU of new capacity was delivered last month, following the delivery of 180,000 TEU in August, 200,000 TEU in July and a record 30,000 TEU in June. And the fleet of mostly large containerships being delivered from Asian shipyards will continue into next year, leading to a worsening disconnect between supply and demand.
In fact, MSC alone has an order book of 1.5 million TEU, with CMA CGM close behind with 1.3 million TEU on order.
Geneva-based MSC currently has an operating fleet of 5.4 million TEUs, and the gap with Maersk has widened to 1.3 million TEUs before taking into account new ship orders, according to Alphaliner data.
MSC has taken delivery of two 24,000TEU ultra-large container vessels (ULCVs) this month, but Alphaliner noted that the latest delivery, the 24,346TEU MSC Micol, is likely to be idle for three weeks until it is phased in on the 2M Lion/AE6 loop next month.
However, with the announcement of the 2M winter plan, ultra-large container vessels (ULCVs) may be at anchor for a longer period of time.
Arctic route challenges Suez Canal
Xiaofeng has already introduced the Arctic route to everyone before. This route brings many conveniences.
According to Moscow, it is hoped that this Arctic corridor, especially the hydrocarbon trade corridor, will be able to challenge the dominance of the Suez Canal in the future.
Relevant personnel said that once the route is fully operational, the Arctic route will promote trade between Asia and Europe, which is 40% faster than the Suez Canal route and 60% faster than the Cape of Good Hope route.
In the past, shipping routes between Asia and Europe had to pass through the Cape of Good Hope or the Suez Canal, but not only was the journey long and time-consuming, but passing through the Suez Canal also required a toll of US$500,000.
In contrast, the Arctic route can sail along the Arctic Ocean and the northern coast of the Eurasian continent, reach the Pacific Ocean directly after passing through the Bering Strait, and continue south to reach the east coast of China. The entire journey takes only more than 6,000 nautical miles, which is half the time of the Suez Canal route, and it only takes about half a month to reach the destination.
Recently, according to data released by the General Administration of Customs of China, the trade volume between Russia and China in the first seven months of 2023 increased by 36.5% compared with the same period in 2022, exceeding US$134.1 billion.
According to analysis by industry professionals: Judging from the trade data in recent years, China and the EU have roughly the same share of trade with Russia.
According to preliminary estimates, China accounts for about 30% of Russia's imports, and this figure continues to increase. It can be said that China has an absolute advantage in Russia's foreign trade.
In terms of import and export categories, China's import demand for Russian agricultural products, seafood, timber, fertilizers, etc. is expanding. Russia is further expanding imports of Chinese electromechanical equipment, daily consumer goods, electronic products, etc.
Earlier, Russian presidential aide Igor Levitin said that the upper limit of the Siberian Railway's transportation volume is about 220 million tons, and the recent cargo has reached 80 million tons.The Arctic route will become a new transportation "artery".
Although there are still many challenges in the development of container liner shipping on the Arctic route, there is still a good prospect for development.
Against the backdrop of Russia's comprehensive promotion of the Arctic development strategy and acceleration of the eastward shift of its foreign exports, the status and role of the Arctic route have become more prominent.
Ke Jin, the Russian representative of Xinxin Shipping, said that in order to realize the weekly operation of container ships on the China-Russia Arctic route, Xinxin Shipping has invested 5 high-ice-class container ships. It is expected that if weather and other conditions permit, the route will be able to operate from July to the end of October.
"We are confident that we can build the Arctic container liner shipping route into a high-quality route between China and Russia, and contribute to the two countries' joint construction of the 'Polar Silk Road'," Ke Jin said.
Source｜Shipping Network, One Shipping, Today's Shipping, Cangsou Overseas Warehouse, Shipping Information, etc.
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