Outlook Brightens for RORO Carriers
And just as the outlook started to brighten, Japanese antitrust authorities in March slapped a $225 million fine on six companies, including market leaders Wallenius Wilhelmsen Logistics, “K” Line and NYK Line for their part in a price-fixing scheme on ocean freight rates on international routes.
Further financial hits are possible. Several class-action lawsuits were launched in the U.S. last summer, and European antitrust authorities are investigating alleged cartel activities. There are also concerns that growth in global automobile exports will slow as production increasingly shifts to import markets.
Japan’s “K” Line, whose 100-strong fleet carries some 3.3 million cars a year, believes the move of production plants to importing nations will limit growth in seaborne automobile trade, and is diversifying its client base to carry more construction and mining vehicles, heavy trucks, agricultural equipment and static ro-ro cargoes.
“K” Line rival MOL is embracing the shift in production to drum up business for its car carriers. It just launched a weekly three-vessel service transporting new cars from the east and west coasts of Mexico to ports in the North American Free Trade Agreement region.
DFDS Chief Executive Niels Smede-gaard has warned that the 40 to 50 percent higher cost of cleaner fuel will lead to bankruptcies and route closures. The Danish line expects to spend nearly $140 million to equip 20 vessels with “scrubbers” that remove sulfur from exhaust gases, but it already has stopped serving one Baltic route in response to the new regulations and another four to seven are at risk of being shut down.
Older vessels that can’t be fitted with scrubbers or don’t justify heavy investments likely will be switched to southern European routes where the regulations take effect in 2020. DFDS plans to impose a low-sulfur surcharge that will lead some shippers to switch to trucks and thus undermine the EU’s policy of encouraging more freight shippers to use greener sea and rail transport.
The industry could face a radical shakeup in its key North European market in early 2015, with weaker carriers calling it quits and stronger ones slugging it out in a fresh outburst of consolidation.
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Kyith worked as an IT operations engineer from 2004 to 2019. Currently, he works as a Senior Solutions Specialist in Fee-only Wealth Advisory firm Providend.
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