Transcript Liner concentration

Liner conference
From the beginning to the end
Liner conference
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Purposes
Maintain a stable schedule and freight
 Provide optimal capacity
 Consolidate the supply capacity to the trade
 With stable freight income, liners can plan for future
expansion and improvement on service
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Liner conference
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Borderline
Control market freight rate
 Incur additional administration charges
 Provide shelter for the least efficiency carrier
 Anti-competition
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The chapter end
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USA
US Shipping Act 1987
 Ocean Shipping Reform Act 1998
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Europe
Regulation 4056/86 exemption for LC
 Regulation 870/95 exemption for consortia
 EC competition rules
 Failed to promote competitive freight rates
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The results
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USA
Stable rate
 FMC Federal Maritime Commissioner
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Europe
Chaotic situation
 Freight dropped to lowest rate
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Liner concentration
refer to UN ECLAC paper
Concentration
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Liner companies, especially large one, cluster
their services around a particular location
Government’s promotion of port efficiency
 Alliance formation
 Optimal vessels deployed in the trade
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Impacts of Concentration - 1
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Lower unit cost – leads to lower freight rate
Disproportion return on investment – due to
keen competition, company need to pass the
profit to customer
Overcapacity – on certain trade lanes but not the
global situation
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Why high fixed costs and weak conference can give
this impression ?
Impacts of Concentration - 2
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Freight rate fluctuation
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Alliances
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Unstable formation, why ?
Expansion of the trade lane from EW to NS
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High fixed costs induce high marginal pricing. To capture
market share, in short run, company will only set to cover
only marginal costs
Due to cascade effect of newly deploy large vessels
Trans-shipment volume increase
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Port will gain with trans-shipment services
Impacts of Concentration - 3
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Create trans-shipment centre
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Segmentation of smaller liner company
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Even the port can provide good service at low price,
it depends on its location
Focus on a particular segment in the market
Change of government policy
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Depend on the attitude of individual government
Outlook
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Concentration benefit everyone in the industry
Extend to wide coverage – spreading
Beware of the vertical integration as it may turn
into cartel operation
How about the smaller players (liner + port) ?
Small players
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Liner
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Cooperate or focus on a particular segment of
market
Port
Accept the reality and cooperate with regional ports
 Promote trade, encourage more users to use the port
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Regulatory bodies
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Accept the trends in globalisation and privatisation
and open up the market for competition
For the trainer
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The abolition of liner conference and results
Relationship between Liner concentration and
short sea shipping
Impact on port – status of port