The container shipping lines have found themselves politically exposed. US President, Joe Biden, has savagely criticised the shipping sector accusing it of being uncompetitive, asserting that “there’s only nine shipping companies. Nine. Nine major ocean line shipping companies who ship from Asia to the United States…these companies have raised their prices by as much as 1,000%”. The Whitehouse released a video of Mr Biden speaking with retailers and food processors who complained that the increase in container freight rates that they had suffered was greater than their annual profits.
All of this has fed into Joe Biden’s reaction to the increase in inflation which has suddenly become a leading political issue in the US. His plan is to pressure the supply side of the economy to control prices rather than rely on a fiscal or monetary response. Of the companies on the supply side, one of the most high profile and least politically powerful is the container shipping lines.
Joe Biden hopes to be seen to be pressuring the shipping lines to cut prices through the threat of regulation. He is about to sign into law the ‘Ocean Shipping Reform Act’ which will increase the powers of the Federal Maritime Commission over the shipping lines.
The problem is that the Federal Maritime Commission has already said that prices are not rigged and the container shipping sector is highly competitive. Rebecca Dye, the head of the US Federal Maritime Commission concluded in a report published a few weeks ago that “our markets are competitive and the high ocean freight rates have been determined by unprecedented consumer demand, primarily in the United States, that overwhelmed the supply of vessel capacity. Congestion further constrained available capacity.”
Where this leaves the container shipping industry is unclear. Politically powerful lobbies in the US such as the retailers are suffering from higher freight rates and will look to remedy the situation but the real danger is that politicians will use the shipping line scapegoats, portraying them as wicked foreign oligarchs exploiting vulnerable Americans. This is dangerous for the sector. Perhaps it is the price that has to be paid for its short run of profitability.
Source: Transport Intelligence, 16th June 2022
Author: Thomas Cullen