The former head of the US operations of liner outfit United Arab Shipping Company (UASC) has fired a broadside on the industry he worked in for decades, urging authorities to step in and axe current alliance set-ups.
Anil Vitarana, who worked for UASC as president of North American operations through to 2015, currently runs shipper advisory Cranford Consulting out of New Jersey.
Writing on LinkedIn, Vitarana pointed out how the average spot rate for an feu going from China to the US west coast according to data from the Shanghai Containerized Freight Index ( SCFI) had leapt by 780% over the past 26 months.
If the alliances changed the competitive landscape, withdrawing regulatory approval could equally change the equilibrium
Vitarana hit out at the $190bn profits liners are thought to have made last year, according to Drewry estimates. The extraordinary turnaround in fortunes, he stated, was down to liner consolidation and the overarching power of the three global container alliances, something he urged Washington to dismiss.
In the social media post, entitled ‘Are ocean carriers guilty of price gouging?’, Vitarana wrote: “Carrier consolidation and the regulatory approval granted to the major carriers to group themselves into 3 alliances completely changed the competitive landscape that allowed prudent capacity management. When demand suddenly increased, carriers found themselves in the driving seat.”
Vitarana has counselled his clients who are primarily smaller importers to bring their plight to the attention of the secretary of transportation, the Federal Maritime Commission and their local representative in the senate and the house of representatives.
“Hitherto,” he wrote, “they remain disappointed with the response and do not believe that the proposed Ocean Shipping Reform Act ( OSRA 21) would be the panacea for their ills.”
Vitarana’s solution is to disband the alliances in the US.
“If the alliances changed the competitive landscape, withdrawing regulatory approval could equally change the equilibrium,” he wrote, stressing that this was not something that could happen fast as it could actually worsen today’s supply chain crisis if done a haste. Vitarana suggested a two-year period of notice to allow carriers to use their profits to augment capacity and launch individual services, bringing back more competition.
The nature of the three global liner alliances has been scrutinised by authorities and shippers around the world during the pandemic, when lines have reported all-time record profits while at the same time operating the sloppiest schedule reliability in the history of containerisation.
Carriers have sought to play down much of the political posturing. The World Shipping Council, the Washington DC-based liner lobbying group, has argued that normalised demand, not regulation, will solve the supply chain woes that have bedevilled shippers over the past year.