“Faced with the energy transition, maritime transport lacks rules”

Maritime transport. He worked in the shadows for a long time and his boats, giants of the seas, can often be the size of three football fields, but you never see them, especially in Switzerland. This landless country is, however, home to many cargo heavyweights, starting with the main one, the Geneva-based MSC. The pandemic and the port closures it caused caused traffic jams and highlighted the challenges of this sector that transports 90% of commerce.

This sector emits 3% of CO2 emissions, without being able to design a carbon neutral ship. Their rates and profits have soared, but they are almost untaxed and there are traffic jams at sea. The dot with Lina Jasutiene, director of Recoupex, an office based in Hamburg and Geneva, specializing in maritime law.

Le Temps: During the pandemic, traffic jams formed along supply chains. Is today?

Lina Jasutiene: In the last two years, every link in the supply chain has failed. Today, the situation is stabilizing, demand is stabilizing and supply is expanding. The number of boats will grow as shipping companies explode their order books. So that in 2025 its capacities will be 30% higher than before the covid, according to the Barclays bank. But the situation remains tense, at the mercy of confinement.

Queues remain at the port entrances. Why does it take so long to clear shipping routes?

Covid forced the closure of ports and reduced boat entries. Demand suddenly increased after the lockdowns. Containers sold out everywhere. The confined workforce could not access the ports even when they reopened.

Read too: This box that revolutionized the world

Is today?

The strikes in ports exacerbate all these ills. There were strikes in the United States and in Hamburg this summer. At Felixstowe and Liverpool, two of the main English ports, they threaten. The labor shortage has worsened during the pandemic. Today’s new generations lack truck drivers, longshoremen, warehouse workers and airport workers. They hesitate because conditions are difficult, wages are low and they are not improving.

You were saying that demand is stabilizing. Because?

A global container price index shows that a peak was reached in September 2021 and since then prices have been falling. But we are still at very high levels. The furniture industry in Spain is growing, as is the textile and food industry: production is shifting. This movement is related to low volumes, but has an impact. It costs more to build a sofa in Spain than in China, but if you factor in shipping costs and delivery delays, the consumer is there. He is increasingly willing to pay more for a short circuit.

Did the war in Ukraine impact these supply chains?

When war broke out, everyone expected a new logistical drama. Not really, traders quickly found new markets. India, which exported fruit to Ukraine, found markets in Russia, Europe and Canada. Ditto for oilseeds: other countries managed to partially offset what came out of Ukraine, such as Brazil. Ukraine-dependent countries in North Africa are doing better than expected. And the transport world has adapted.

Carriers, including MSC, serve Russia for essential goods. How much does the Russian population depend on it?

The food is not under sanction, it can be delivered to Russia even though Swiss traders have withdrawn from this market. Russia is a huge and resilient market. It managed to find new suppliers, in Turkey, for example. The EU estimated that Russian GDP would contract by 15%, in fact, it fell by just 5%, according to official data. In the peripheral regions of Russia, people are used to living on the bare minimum of their land. If the war continues, I don’t think they will suffer from food shortages.

Shipping companies are making impressive profits, which is reviving the debate over their near-zero taxation. What is your opinion?

It is true that they pay little tax and make record profits. By 2022, its profits are expected to increase by 73%, according to Bloomberg. This generates tensions between politicians in search of scapegoats. France requested that CMA CGM pay an exceptional tax of 25%. But carriers are also investing heavily, for example, in cleaner boats.

Can paying a minimum of taxes promote the climate cause?

In this industry, nothing is entirely black or entirely white. Operators have not been profitable for years and are now taking advantage. There are statements – CMA CGM, Maersk and MSC have said that by 2050 they will only have green ships – but no tangible measures.

Read too: Shopping at all costs for MSC and the maritime giants

The industry pays a minimum of taxes and manages to be exempt from an OECD reform that aims to tax the profits of large multinationals by 15%…

This industry is known for its lobbying, which means the industry should be spared this reform. On average in Europe, bulk carriers pay 3% tax, tankers 6%, cruise lines 0% and freight forwarders (such as DHL or Kuehne+Nagel) 27% on average in the EU. These differences are huge. The problem is that the gap between the carriers’ current profits and their low tax rates has become extreme. Especially since carriers are often held to be partially responsible for inflation.

Switzerland is debating a tonnage tax that, given industry profits, would reduce industry taxes. Is that reasonable?

Switzerland wants to attract more transporters, even as the tonnage tax, which wants to tax companies according to their transport capacity rather than their profits, reduces the sector’s tax collection. This tax has the advantage of being applicable everywhere and being used in many countries. We know that it would be beneficial for companies but we don’t know if it will be the case in Switzerland because we don’t know how many companies would come if this tax were adopted.

The industry is focusing. The top six operators now control two-thirds of the market, according to Alphaliner.

in force. Now, as competition authorities would not authorize acquisitions between majors, they invest in adjacent sectors, terminals, barge companies, truck companies, airlines. Big groups now want to go door to door. No longer dealing only with maritime transport, but connecting the shipper to the end customer.

Can an MSC merge with a DHL suddenly?

This is the direction the industry is taking. Also, when MSC bought the Bolloré group’s logistics activities in Africa this winter, it is somewhat similar to what it did. Historically, shipping companies sold freight to freight forwarders. Today, they want direct access to customers.

Finally read: The ocean liner MSC World Europa, symbol of a difficult transition

Because?

Because if we can do it without an intermediary, it’s cheaper and we have more control.

By order, sea transport is the cleanest means of transport. still pollutes a lot and don’t find a real solution to go green.

It’s complicated again. Faced with the energy transition, maritime transport lacks universal regulation. This is all the more necessary as it is a globalized sector.

Is this a failure of the International Maritime Organization?

It is a political failure because the IMO is a UN body that depends on its member states. They set the tone, but there are disagreements, so there are no international guidelines. IMO has good intentions, but it is not enough. There are individual initiatives, but small-scale promises remain, often isolated. In addition, when we have cleaner fuels, there is a shortage and it is difficult to refuel.

Read again: The long wait for international merchant shipping

Is there also no lack of technical solutions? We don’t know how to build a big carbon neutral boat.

Technical solutions are lacking because there is little research. The industry, with its profits, should give more impetus. For now, innovations mostly come from non-industry startups. Whether in digitization or security, with blockchain. Some build lighter containers, others allow remote monitoring of cargo and equip the containers with sensors to combat trafficking.

At the same time, 3,133 containers fell overboard in 2021, an increase of 400%, according to the World Shipping Council.

With the stress on supply chains, controls have been less diligent. This represents 0.01% of the 241 million containers handled in 2021, which may not seem like a lot. But from an environmental impact point of view, it’s a lot. The problem is that when a container goes to sea, investigations are complicated and their results are not public. There is a lack of qualified personnel on board to carry out these checks.

Read too: Merchant navy urged to react to containers lost at sea

How to explain that the main operators are European, while in so many other industries Asia has taken the lead?

It’s historic. The great discoveries of several centuries ago were made across the oceans of Europe. Chinese companies do exist, but they are young and regional. There is little room in this market and barriers to entry are high. That said, most boats are built in China and South Korea.

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