1ELAA Board MeetingGeneva 23 September 20081

2ELAA Board MeetingGeneva 23 September Chris Bourne Executive Director European Liner Affairs Association Did the Abolition of Conferences on European Trades Help Precipitate the Shipping Crisis? Can the Liner Industry expect Global Harmonisation of Laws? 23 October 2009 Dalian 2

3 WHAT IS ELAA? Established in 2003 Formerly a lobbying group for the container shipping industry for the replacing of the conference system Lobbied for the new Consortia Regulation New Trade Association for trades to and from Europe producing for the first time detailed volume data for European trades

4 October meant the end of the Conference System for European Trades Exactly one year ago END OF CONFERENCES IN EUROPE

5 WHAT DID THIS MEAN FOR EUROPEAN TRADES? No meetings allowed to discuss supply and demand No business plans No conference surcharges or ancillary charges 127 years of experience was discarded The Abolition of the Liner Shipping Conference for European Trades marks the end of a globally coherent regulatory system covering liner shipping services

6 DID THE ABOLITION OF CONFERENCES ON EUROPEAN TRADES HELP PRECIPITATE THE SHIPPING CRISIS? It certainly did not precipitate the crisis but abolition could not have come at a worse time The imbalances between supply and demand in 2009 have been so great that no conference could have saved the situation. The TSA did not save the Transpacific Rates were bound to come down but Conferences may have slowed the free fall that happened Uncertainty inevitably helped destabilise the market

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8 IN SOME WAYS ABOLITION DID HELP Lines/Consortia did not wait for Conference discussions on supply and demand Individually and in Consortia they off-chartered ships and laid up capacity more speedily than might have been with conferences Good to see that the European Consortia Regulation has been extended to 2015

9 CONFUSION Confusion caused by lack of direction in the market – Conferences had given direction—now no business plans Uncertainty about Ancillary Charges and Surcharges as every line did their own thing Did abolition of Conference ancillary and surcharges actually matter? Shipper look at overall point/point rate Surcharges and ancillary charges only covered certain items Shipper always negotiated on ocean freight and pre- and on-carriage of goods

10 OBEYING THE LAW Lines are obeying European competition law ELAA held 43 seminars around the world with its Members Lines are very nervous about the potential to break the law The potential fines are 10% of total group turnover Result: Lines are not using the legal opportunity to discuss what is happening in the market Lines are not doing legal supply and demand forecasting

11 LINES’ FRUSTRATION Shipping lines are losing huge sums of money Reported in the press that some are seeking State Aid This is against the tradition of the industry but the financials are so bad there is no alternative Mr Tung of OOCL has spoken as follows: “Our goals should be with governments to provide our industry with the ability to collectively discuss capacity management and rationalisation for a short term period of say one year” Mr Saade of CMA CGM claims that as European trades are the only ones influenced by the abolition of Conferences then there is a disproportionate effect on European lines

12 OUTLOOK -BRUSSELS’ HOPES FLLOWING ABOLITION Brussels hoped that the world would follow their lead But most regulatory authorities are doing nothing Some are said to be studying but then they say ’not yet‘ to implementation Some regimes could be considered as going the other way – Shanghai Shipping Exchange

13 OUTLOOK- INDUSTRY EXPECTATION There is no prospect of there being a global competition law for the Shipping Industry for many years It would seem that the industry will just have to struggle on and hope for economic recovery But the European experience has shown that we can have a meaningful dialogue with a Regulator. We do have meaningful Commission Guidelines which tell us the legal parameters The Industry for European trades at least has a volume database And the lines relationship with their customers has improved