The break up of liner conferences on European trades provides an opportunity to further develop collaborative relationships in order to reduce supply chain uncertainty and therefore cost. This was one of the messages from a speech by David Mawer, Joint Managing Director, JF Hillebrand, at a meeting of the European Shippers Council today.

“Optimum efficiencyis achieved by collaboratively working to reduce uncertainty, which means improving reliability and responsiveness in the supply chain. Minim ising inventory whilst maximising availability,” Mawer explained.

From 17 October onwards, shipping lines will set their own freight rates based on service levels, internal costs and market conditions. Furthermore, individual lines will be responsible for determining their own surcharges such as THC (Terminal Handling Charges), BAF (Bunker Adjustment Factor) and CAF (Currency Adjustment Factor).

While it is unclear how carriers will react to operating individually, there are certain to be major changes for shippers and a lot more scope for negotiation. Certainly there are significant opportunities for both shipping lines and shippers alike, but there are also dangers. One of the major dangers is poor capacity planning leading to oversupply or undersupply. The lead time of putting a large containership into service from order to delivery is a matter of years, therefore the shipping industry is much less able to react quickly to changing market conditions. Oversupply of tonnage will push rates down and could put some lines out of business. On the other end of the scale, undersupply will push up freight rates and could affect global trade growth. 

Whether for good or bad, life is going to get a lot more complicated for all involved. But the key consideration in the post-conference world is not to base decisions purely on freight rates as these are not the sole cost in a supply chain. Shippers could find that cutting costs on the carrier could end up costing them more elsewhere in the supply chain.