Layup plan may impact ports

“Given the huge oversupply of feeder ships in the coastal European market, operators have found themselves between a rock and a hard place in either laying up container ships long term or trading at a loss – and with either option courting insolvency,” Mike Burns, Marine & Transit Partner of law firm Weightmans told

Port Strategy

.

The scheme would apply to container vessels under 1,400 teu

.

Since most of the smaller, feeder or tramp ships are German-owned, the original idea was broadly for the German owners to get together (with finance house backing) and share a group layup cost via a centrally-owned umbrella company

.

This organisation would also only charter out vessels at a minimum base-level somewhat above the current depressed market rate

.

Opponents of the scheme, principally chartering interests, have vociferously argued this would have the effect of artificially inflating the market charter rate from both insisting on a price threshold, and reducing vessel supply in the market

.

“Obviously the level of complaints rang alarm bells in Brussels,” said Mr Burns

.

“Under EC competition law (Articles 81 and 82) it is illegal for parties in the same industry to collude so as to fix prices whether directly or indirectly

.

It was pretty obvious at the outset that this scheme would run into problems

.

” Consequently, the plan was amended to take out the minimum charter price but to retain the lay up incentive

.

But this hasn’t silenced the angry noises from other northern European parties, who still feel that this is going to be a cartel, with all that implies

.

“It still leaves room for the accusation that it distorts the market,” explained Mr Burns

.

“I could see a possible way round it if there was a wider benefit to others in the logistics chain, including the consumer – there are limited exemptions under EC regulation – but the proposed scheme only seems to benefit its participants

.

“

Aside from the probable German winner of the layup lottery – a lay up site near Kiel having already been ear-marked – Mr Burns said he doesn’t think the scheme bodes well for European ports

.

“Against a background of fewer ships on the water, if this scheme comes to fruition and encourages a large part of the feeder pool to layup instead of trade, port throughput will be depressed and that cannot be good news for port growth strategies in the immediate term

.

“