Reliability before price
Shippers too can contribute to supply chain resilience, says the ESC. Not only in Kiev, but also in Taipei, not only for shipowners, but also for suppliers – supply chains are at risk in many more places today than they were just a few years ago. In Vienna, Roman Stiftner, president of the European Shippers Council, explained to ITJ correspondent Josef Müller how Europe’s shippers are reacting to bottlenecks and oligopolies in the transport and commodities sector.
A painful change is currently taking place in the global economy, not least triggered by measures to counter Covid-19 as well as the Ukraine war. Thus Roman Stiftner, president of the European Shippers’ Council, told the ITJ in Vienna recently that “the Covid-19 pandemic has shown that our supply chains are vulnerable to crises, and that we therefore need to undertake efforts jointly with policymakers to make them more resilient.”
The European Shippers’ Council supports the European Commission in its measures to reduce climate change – even if one of the consequences is that shippers will have to buy the EU’s ‘Emissions-Trading Scheme’ certificates (ETS) for transport activities in the future.
The ESC nevertheless called on policymakers to keep the overall burden of the planned ETS regime on firms as low as possible, and to avoid double charging. It is imperative that the revenues from the certificates be invested in modern infrastructure and digital innovation, Stiftner said.
He’s currently concerned about tension not only with Russia, but also over the Taiwan issue. About 40% of global demand for semiconductors is manufactured in Taiwan, which is why supply disruptions could have a fundamental impact on value-adding processes in Europe and also harm world trade.
Stiftner believes that “restoring resilience is the priority for supply chain managers. In the short term, the shipping industry will probably be able to deal with the situation and manage the current crisis. We have no influence over whether the Chinese government closes container terminals in the short term, on the basis of its ‘zero tolerance’ approach to Covid-19. I’m convinced that priorities will shift in favour of quality and regionality.”
In practical terms this means that business will no longer be about sourcing a commodity or a raw material as cheaply as possible. In the event of the supply chain becoming disrupted the reliable arrival of goods has more influence on the costs of the overall production process than a comparably low purchasing price can have.
Not only shipowners, also suppliers
For Stiftner the current market situation in the maritime transport industry represents a major challenge for world trade. The deepsea shipping market is dominated by a small number of big players, which wasn’t a good starting point for the big challenge that the outbreak of Covid-19 posed for the market.
The market was unable to cope with the huge increase in consumer demand, leading to jumps in profits for container shipping lines. The Block Exemption Regulation (BER) for shipowners is not currently necessary to protect ocean shipping, but there are still some distortions from the pre-Covid-19 era, he said.
Reduce dependence on a sole supplier
Stiftner is convinced that one reason for the BER is to increase efficiency in the market by coordinating capacities. “For us as shippers it’s really hard to imagine what the situation would have looked like without a BER.” Various trade and industry sectors in Europe have problems with raw material procurement because they are often dependent on one sole supplier. “Switching to multiple suppliers is easier said than done. No responsible company negligently enters into dependence on a single supplier,” Stiftner says.
Monopolistic supply structures are a fact of life, not only in the raw materials sector, but there especially. A recent study has shown that there is complete dependence on China for strategically important metals for high technology.
A recent example of this is magnesium. It is needed to produce aluminium and steel alloys. Without magnesium, no car rolls off an assembly line and no wind turbine can be built. Europe is 95% dependent on China for magnesium, and China has deliberately and strategically restricted supplies to Europe.
The consequences are a price explosion as well as an awareness that Europe has lost a great deal of autonomy in many important value chains, such as the automotive industry, amongst other sectors.