"Conspiracy to raise freight rates"! 23 shipping companies face a fine of 512 million yuan

In the past year, the global shipping industry has been booming, and the development of cross-border e-commerce has brought a bright future to the shipping industry. Coupled with the background of the global epidemic, which may lead to the suspension of ports in some areas, tight containers, and hot demand for container ships, many shipping companies around the world have seen the opportunity to "make money".

23 shipping companies "conspired to increase freight rates", South Korea: fine!

Recently, the Korea Fair Trade Commission (KFTC) fined 23 shipping companies for conspiring to raise freight rates. It is understood that the agency believes that these 23 shipping companies have manipulated freight rates on multiple routes between South Korea and Southeast Asia in the past 15 years, which violated the Fair Trade Act and imposed a fine of 96.2 billion won on them .

South Korea's move to punish shipping companies has attracted widespread attention in the industry. It is reported that the 23 punished shipping companies are composed of 12 local shipping companies and 11 foreign shipping companies , including internationally renowned shipping giants such as Korea Shipping, SYM Marine, Evergreen, and Wan Hai.

It is reported that shipping companies such as Koryo Shipping and Changjin Shipping began to raise freight rates on the three routes of South Korea-Southeast Asia, South Korea-China, and South Korea-Japan in October 2003, conspiring to drive up shipping rates . Later, domestic and foreign shipping companies under the Association and the Intra-Asian Freight Rates Agreement ( IADA) also joined the collusion.

The Fair Trade Commission stated that the 23 shipping companies did not report to the Minister of Oceans and Fisheries within 30 days, nor did they fully communicate and negotiate with the cargo owner group on the content of the agreement, which did not meet the requirements for joint behavior stipulated in the Maritime Transport Act. It decided to apply the Fair Trade Act to sanction them.

Previously, the South Korean Fair Trade Commission's reviewer had proposed that the shipping company involved should be fined 800 billion won, but the Fair Trade Commission said that in view of the particularity of the shipping industry and the limited impact of the incident, it decided not to punish Southeast Asian import flights. The final decision was to fine only 96.2 billion won, about 512 million yuan.

This is the first time that South Korea's antitrust department has punished a shipping company for monopolistic behavior, and this tradition of shipping alliances is currently facing detailed scrutiny from regulators.

In response to the penalty, Evergreen and Wan Hai Lines responded separately that they have not yet received written notification from the competent authority, while Yang Ming said it will evaluate whether to appeal after receiving the judgment.

According to foreign media reports, the Korea Shipping Association ( KSA) expressed regret for the penalty, but also planned to file an administrative lawsuit. The association said that the collective behavior of shipping companies in the past 40 years has been regulated by the Ministry of Land, Infrastructure and Maritime Affairs and the Shipping Act, and said that this penalty may cause a crisis in the industry.

Although the shipping industry is indeed in a bonus period due to the combined effect of many factors such as the environment, the epidemic, and the prosperity of sea exports, this behavior of "conspiring" to increase freight rates in violation of the Shipping Act and the principle of fair trade will indeed disrupt the global shipping environment. Relevant Korean departments have intervened to prevent shipping prices from rising wildly under the interest trend of shipping companies, and to contribute to creating a sustainable shipping environment.

Behind the rise in freight rates are the high profits of various shipping groups.

Global shipping profits may exceed $150 billion in 2021

Relevant data show that the global shipping industry's profits are expected to set a new historical record in 2021. This figure may exceed US$150 billion, or about RMB 952.9 billion . In 2020, this figure was only US$25.4 billion, an increase of nearly 5 times year-on-year.

Currently, only 10 container shipping companies in Asia and Europe, led by Maersk, Mediterranean Shipping Company, CMA CGM and COSCO Shipping , control nearly 85% of the world's maritime cargo capacity . 25 years ago , the top 20 companies controlled about half of the world's capacity.

From the specific data, for the global shipping giant Maersk Group, the actual profit in 2021 is expected to reach US$24 billion, or about RMB 152.5 billion, which is expected to reach or exceed its comprehensive performance in the past nine years. COSCO SHIPPING Holdings' net profit in the first three quarters of 2021 also reached 67.59 billion yuan, a year-on-year surge of 1651%. CIMC's net profit in the first three quarters of 2021 was also 8.799 billion yuan, a year-on-year increase of 1161%.

The high profits are also reflected in the employees' year-end bonuses. It is reported that Evergreen Shipping pays employees a year-end bonus of 40 times their monthly salary . As soon as the news came out, it aroused the envy of many people in the industry, and some sellers even expressed their desire to change careers.

The ambitions of major shipping companies are not limited to ocean shipping. The supply chain disruptions caused by the epidemic have further promoted the development of cross-freight mode merger trends, and shipping giants have also set off a wave of mergers and acquisitions.

In December last year , Mediterranean Shipping Company (MSC) proposed to acquire the African subsidiary of Bolloré Logistics. Maersk not only acquired e-commerce company HUUB, European B2C, etc., but also further expanded the air cargo market.

This multi-channel approach to create a broader transportation network can not only diversify revenue, but also provide more comprehensive supply chain solutions based on customer needs. Shipping giants are also constantly expanding in this direction.

In addition to the shipping industry, the container manufacturing industry is also making a lot of money. The global supply chain disruption has led to a surge in demand for containers in the industry. Freight container manufacturer Singamas expects its profits in 2021 to exceed US$180 million, a nearly 40-fold increase from US$4.58 million in the same period last year.

2021 is not only a period of vigorous development for global e-commerce, but also a golden age for the shipping industry. Supply chain disruptions have caused an imbalance between supply and demand, and the resulting price increases are also an important factor.

The combination of factors such as the epidemic and supply chain issues has led to a surge in freight rates

Since the outbreak of the epidemic, shipping costs have continued to grow rapidly from 2020 to the present. Although there have been short-term declines, overall, freight rates for both containers and dry bulk cargoes have soared. Data shows that in October 2021 alone, global ocean freight rates have increased by more than 90% over the previous year.

Among all routes, freight rates on the Europe-US route have increased most significantly. Data shows that freight rates on the Europe-US route soared five times in the first half of 2021 compared with 2019.

In addition, freight rates on Southeast Asian routes also saw an alarming increase in the second half of 2021, and skyrocketed in early December 2021, more than doubling . It is understood that during the outbreak of the epidemic in Southeast Asia, the freight rate for a 40-foot container increased from the original US$500 to a maximum of US$2,500, a five-fold increase, which put many carriers under great pressure.

In this regard, some industry insiders analyzed the reasons. They believe that the repeated outbreaks of the epidemic have caused consumers in various countries to reduce the number of times they go out shopping. More people have turned to online shopping, which has increased the export transportation volume of various countries, thereby increasing the demand for containers and cargo ships.

At this time, the continued port congestion made it impossible or impossible to deliver goods on time, the cargo accumulation at the port became more serious, there was a shortage of empty containers, and an imbalance appeared between the overall cargo transportation volume and shipping capacity . This imbalance between supply and demand naturally drove up freight rates.

In addition, the epidemic has changed consumer spending habits and caused a labor shortage. Due to the occasional infection of employees, shipping companies may suspend voyages during transportation. On the other hand, if employees at a port are infected, the port will be temporarily closed, affecting the progress of transportation, and the shipping capacity will decline again, further exacerbating the imbalance.

The West Coast Ports of the United States are the best example. The congestion in the ports has not improved yet. At the beginning of this year, the American Trucking Association stated that there are still more than 100,000 empty containers stranded in the Ports of Los Angeles and Long Beach, but the freight rates to the West Coast Ports of the United States are still high.

Relevant persons in charge of many foreign retailers said that if the supply chain problems are not resolved in time, freight rate fluctuations will continue.

To this end, sellers must make long-term and detailed plans and rationally plan various input costs.

23 shipbuilding companies

512 million fine