Chris%20Bourne%20Executive%20Director%20European%20Liner%20Affairs%20Association%20%20Did%20the%20Abolition%20of%20Conferences%20on%20European%20Trades%20Help%20Precipitate%20the

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Chris BourneExecutive DirectorEuropean Liner
Affairs AssociationDid the Abolition of
Conferences on European Trades Help Precipitate
the Shipping Crisis?  Can the Liner Industry
expect Global Harmonisation of Laws?
23 October 2009 Dalian
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WHAT IS ELAA?

• Established in 2003
• Formerly a lobbying group for the container
  shipping industry for the replacing of the
  conference system
• Lobbied for the new Consortia Regulation
• New Trade Association for trades to and from
  Europe producing for the first time detailed
  volume data for European trades

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END OF CONFERENCES IN EUROPE

• October 18 2008 meant the end of the Conference
  System for European Trades
• Exactly one year ago

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WHAT DID THIS MEAN FOR EUROPEAN TRADES?

• No meetings allowed to discuss supply and demand
• No business plans
• No conference surcharges or ancillary charges
• 127 years of experience was discarded
• The Abolition of the Liner Shipping Conference
  for European Trades marks the end of a globally
  coherent regulatory system covering liner
  shipping services

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DID THE ABOLITION OF CONFERENCES ON EUROPEAN
TRADES HELP PRECIPITATE THE SHIPPING CRISIS?

• It certainly did not precipitate the crisis but
  abolition could not have come at a worse time
• The imbalances between supply and demand in 2009
  have been so great that no conference could have
  saved the situation. The TSA did not save the
  Transpacific
• Rates were bound to come down but Conferences may
  have slowed the free fall that happened
• Uncertainty inevitably helped destabilise the
  market

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IN SOME WAYS ABOLITION DID HELP

• Lines/Consortia did not wait for Conference
  discussions on supply and demand
• Individually and in Consortia they off-chartered
  ships and laid up capacity more speedily than
  might have been with conferences
• Good to see that the European Consortia
  Regulation has been extended to 2015

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CONFUSION

• Confusion caused by lack of direction in the
  market Conferences had given directionnow no
  business plans
• Uncertainty about Ancillary Charges and
  Surcharges as every line did their own thing
• Did abolition of Conference ancillary and
  surcharges actually matter?
• Shipper look at overall point/point rate
• Surcharges and ancillary charges only covered
  certain items
• Shipper always negotiated on ocean freight and
  pre- and on-carriage of goods

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OBEYING THE LAW

• Lines are obeying European competition law
• ELAA held 43 seminars around the world with its
  Members
• Lines are very nervous about the potential to
  break the law
• The potential fines are 10 of total group
  turnover
• Result
• Lines are not using the legal opportunity to
  discuss what is happening in the market
• Lines are not doing legal supply and demand
  forecasting

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LINES FRUSTRATION

• Shipping lines are losing huge sums of money
• Reported in the press that some are seeking State
  Aid
• This is against the tradition of the industry but
  the financials are so bad there is no
  alternative
• Mr Tung of OOCL has spoken as follows
• Our goals should be with governments to provide
  our industry with the ability to collectively
  discuss capacity management and rationalisation
  for a short term period of say one year
• Mr Saade of CMA CGM claims that as European
  trades are the only ones influenced by the
  abolition of Conferences then there is a
  disproportionate effect on European lines

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OUTLOOK -BRUSSELS HOPES FLLOWING ABOLITION

• Brussels hoped that the world would follow their
  lead
• But most regulatory authorities are doing nothing
• Some are said to be studying but then they say
  not yet to implementation
• Some regimes could be considered as going the
  other way Shanghai Shipping Exchange

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OUTLOOK- INDUSTRY EXPECTATION

• There is no prospect of there being a global
  competition law for
• the Shipping Industry for many years
• It would seem that the industry will just have to
  struggle on and hope for economic recovery
• But the European experience has shown that we can
  have a meaningful dialogue with a Regulator. We
  do have meaningful Commission Guidelines which
  tell us the legal parameters
• The Industry for European trades at least has a
  volume database
• And the lines relationship with their customers
  has improved