A conference by any other name

Economics is driven by supply and demand: when demand goes up so do prices, but so does the urge to fill the ships, primarily when supply is in excess due to the heady feeling of the possibility that demand will remain high.

As we have seen so often in history, the cut throat competition can be tempered by the inherent urge of the industry to work together. This is where conferences and pools are derived from. Today, both are under scrutiny or indeed illegal but nevertheless ways are sought to survive the baser instincts of competitiveness. Bulk pools remain in play and the liner industry has moved on from conferences to find that ever larger alliances are necessary to remain competitive from a cost point of view.

In the container sector the top 20 carriers control 83% of global capacity when the orderbook is included. Despite this the industry cannot be considered to be “concentrated”. The urge for survival, however, is bringing strange bedfellows together. We now have two major operational alliances that exist to better manage capacity, treading a fine line with regard to anti-trust regulations.

These alliances – P3 and G6 – combined control nearly 54% of the global capacity. The industry is trying to work out whether this is a good or a bad thing. Certainly it allows for operational cost savings for the alliance members and in theory they should continue to battle it out on the pricing front. Carriers outside these alliances are in a quandary as to how to compete and we should expect to see a number of them attempt to join one or the other of the two alliances, or at least to buy slots from them. Shippers on the other hand are concerned that prices will be driven up.

All of this sounds almost like a revival of the ‘anti-competitive’ conferences – are we in danger of going full circle?