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Cosco container giant:
With 476 ships, the Chinese shipping company is one of the five largest in the world.
The company faced allegations of market abuse and price fixing in the United States last year.
A comparison was made.
Photo: Markus Scholz/dpa
Mr. Stamer, in recent years the world's largest container shipping companies have often barely earned their capital costs, profits have been bubbling up since 2020, and in 2021 the industry was able to make an estimated profit of around 150 billion US dollars. What do you see as the main reasons for this?
Vincent Stamer:
The demand for consumer electronics, sporting goods and furniture has increased immensely during the pandemic.
German furniture imports, for example, were at times more than 20 percent of the pre-crisis level - despite supply bottlenecks.
Many of these products are produced in China and transported in containers.
This has led to extreme demand for containerized freight, but supply has not come close, sending freight rates skyrocketing.
Did the magnitude of the earnings explosion surprise you?
The magnitude of the gains didn't surprise me in general.
Overall, however, they exceeded my expectations.
We continuously track spot freight rates.
On the sea route from China to Europe, these rates have increased more than sevenfold in the past two years.
This huge jump has kept shipping companies coffers buoyant, so the earnings gains aren't that big of a surprise, given that shipping companies' quarterly earnings reports for the past year have already suggested it.
High demand, tight container supply, skyrocketing freight rates - especially during the pandemic, criticism was voiced again, with shipping companies using their position to keep prices high. What's up with the allegations?
Forwarders and importers certainly suffer from the high freight rates.
However, we must distinguish between market mechanisms on the one hand and the exploitation of market power on the other.
So far, I have not seen any reliable evidence of the abuse of market power by the shipping companies.
In the past year, for example, shipping companies commissioned significantly more container ships than scrapped them and sent inactive ships back to sea.
Cartels would do the opposite: reduce supply, not expand it.
However, this narrative of market power also does not explain why the freight rates from China to Europe per container were recently more than 14,000 US dollars, but in the opposite direction below 1000 US dollars.
The market power is the same on both routes.
If today ten large container lines control more than 85 percent of sea freight capacity, where 25 years ago the 20 largest accounted for just half of the market - can one still speak of functioning competition?
Sure, fewer companies in a market can wield more power, and the same is true in shipping.
Now the consolidation process that we have seen in the last 10 to 15 years was the result of a large oversupply of freight capacity.
The number of providers has therefore shrunk in a natural way.
We are now seeing a changed market environment: the shipping companies can make significantly higher profits thanks to the sharp rise in transport costs.
The pressure to consolidate is decreasing.
If industry developments reflect this, competition will continue to function.
Do you still expect further mergers or acquisitions among container shipping companies?
We don't know the internal plans of the shipping companies, but the market environment now makes mergers and acquisitions much less necessary than maybe five or six years ago.
Consolidation makes sense if synergy potential can be leveraged.
If container ships are not fully utilized, shipping companies can combine transports and create synergy effects.
But if the ships sail the seas fully laden, the argument for a cooperation or merger falls away, at least against this background.
The shipping companies are already creating these synergies through alliances by coordinating schedules and sharing shipping space. Do the regulatory authorities therefore have to intervene, as interest groups representing freight forwarders and importers are demanding?
The alliances help to better sort and utilize capacities.
But within these alliances, price fixing is strictly forbidden.
If importers or forwarders have evidence of this, they should hand it over to the authorities.
Well, in late summer 2021, a well-known US furniture manufacturer sued the major shipping companies MSC and Cosco for alleged collusion during the pandemic at the expense of US consumers. With Cosco it came down to a comparison.
MSC, headquartered in Geneva, firmly rejects the allegations
.
There was no guilty verdict or admission of guilt in this settlement before the Federal Maritime Commission.
That doesn't rule out the possibility that there might have been collusion.
But we don't know.
In the EU, however, the European Commission reviews the exemption for existing alliances every four years.
We need a shorter rhythm here.
Let's look ahead. Because of the fabulous increase in profits, some shipping companies are now a little depressing their profit expectations for the current and coming year. For this to happen, freight rates, as a key profit driver, would have to drop significantly. Is that what you expect?
Three months ago I would have answered the question for 2022 with yes.
Now I expect the Omicron variant to slow down the normalization process.
Why is that? Too many ships stuck?
According to my calculations, 11 percent of the transported goods are currently still stuck on stationary container ships waiting in front of ports to be able to unload their cargo.
This is only slightly lower than the peak value in summer 2021. This is due to the huge increase in freight, but also to a lack of port infrastructure or hinterland transport.
Ships that are stuck in traffic are not available and reduce the supply of containers.
These traffic jams will not clear up anytime soon.
Omicron could also lead to terminals closing again in China's ports.
The overall situation is still uncertain and it is possible that freight rates will therefore not fall as quickly as we would have expected a few months ago.
At the same time, we see that the shipping companies are again ordering significantly more new ships. In a few years, shipyards in China and South Korea are expected to deliver hundreds of freighters. It is quite possible that the pandemic and the demand boom will already be history by then. Are the shipowners heading into the next crisis of overcapacity and low freight rates?
I share the fear.
If the pandemic loses its terror and the worst is over, less transport capacity will be demanded as consumption rotates from goods to services.
However, the shipping companies can counteract this by sorting out older and inefficient ships.
They already did that in the first corona shock, were able to keep freight rates comparatively stable and
still got off well despite the high costs for decommissioned ships
.
Have shipowners learned from the ruinous price wars and their growth frenzy of the past?
I hope they learned from it.
And I can well imagine that in the event of a possible economic downturn in the future, more ships will be taken out of the market than put into the water.
Some shipping companies are trying out other ways, buying into port terminals or, like
MSC, want to enter the air freight business through alliances
.
A sensible diversification to position yourself more crisis-proof?
At least the last year showed that risks could have been reduced in this way.
Last year, the Chinese government closed huge container terminals near Hong Kong and near Shanghai.
If the market leader MSC had already had its own air freight capacities at the time, the shipping company could have eased its situation.
Own air freight capacities may be a good strategy for minimizing risks, but they will not replace containers.
On the other hand, transport with container boxes offers significantly higher cost advantages compared to air freight.
20,000 containers shipped on a ship have a better CO2 balance per transported ton and kilometer than other means of transport.
However, the enormous increase in maritime trade has significantly increased the industry's overall CO2 emissions. The problem of high emissions of sulfur oxide, particulate matter and nitrogen oxide from the combustion of heavy marine diesel also remains.
A lot is happening here.
The International Maritime Organisation, a special agency of the United Nations, has made it mandatory for maritime shipping to use fuels with significantly less sulfur content.
And the shipping companies are experimenting with new fuels.
Maersk, for example, aims to commission its first carbon-neutral ship powered by "green" methanol in 2023.
By 2050, the entire fleet of the container giant should be CO2-neutral.
Other sectors, such as the auto industry, are moving faster. How will the mega topic of climate neutrality change container shipping?
The process of decarbonizing international shipping is now getting underway, also because customers are demanding it in order to achieve their own climate goals.
And it will cost the shipping companies money.
Some shipping companies, such as Maersk, will reach the goal of climate neutrality more quickly and thus gain market advantages or expand their market share, while operators of ships with poorer efficiency classes will have to reckon with disadvantages from 2023.
They said the process will cost shipowners money. Will they be able to pass on the cost of new engines and alternative fuels to their customers?
There is a risk that this conversion process will initially make transport more expensive.
In the long term, however, it should also be possible to achieve economies of scale here with new technology and more efficient ships.
The inclusion of deep-sea shipping in a system of CO2 certificate trading could also provide an impetus.
The more customers also demand climate neutrality along the supply chain, the more realistic is clean and efficient shipping in the long term.