A precarious business
Conferences and controversy
A major problem for a shipping company operating a liner service
is the high cost of providing regular sailings. This is especially
so because shipping goes through regular cycles of good and bad
earnings. When business is booming, the liner companies are
vulnerable to another owner entering the trade, only to leave when
trade falls off. Shipping conferences are agreements amongst
companies in a particular trade, for instance Europe to the Far
East, to divide up the available cargoes between themselves. To try
to keep outside operators away, the conference lines give discounts
to shippers who use them exclusively. For the shippers the
advantage is that the conference guarantees regular services in
good times and bad. The conference system is designed to make it very difficult for
an outsider to enter a trade. Nevertheless, the determined operator
can succeed if they are prepared to go on offering low rates. What
usually happens is that they are eventually admitted as a member of
the conference. Conferences are controversial because international trade
organisations are suspicious that they are against the spirit of
free competition. Nevertheless, they have survived into the era of
container ships, probably because shippers see advantages in having
services maintained through good and bad trade cycles.
|
