MSC Chief Blames Customers for Crisis

Shippers caused container shipping's deepest crisis by exploiting overcapacity to drive down freight rates below vessel operating costs, the head of Mediterranean Shipping Company said.

Shippers also contributed to persistent and damaging price instability, according to Gianluigi Aponte, chief executive of the world's second largest ocean carrier.

"Shippers are not that deep," Aponte told the Financial Times newspaper.

"They worry always who will ship for $50 less. The shippers are concerned solely by the price," the London newspaper quoted him as saying.

Aponte also criticized shippers for lobbying the European Union to commit the "grave error" of outlawing liner shipping conferences from European trades in October 2008 at the onset of the crisis in container shipping.

"Shippers' insistence on eliminating the conference ... will create a lot of instability in the future for the European and worldwide economy," Aponte said.

Conferences enable carriers to discuss capacity and demand, thus smoothing out freight rate movements, according to the chief executive of privately-held MSC.

Since conferences were abolished in Europe, the cost of shipping a 20-foot container from Asia has veered between $350 in January 2009 to about $1,500 currently, Aponte said.

"We have multiplied by five the rate in the space of one year. If the situation continues, maybe the rate can even double again," Aponte said.

Aponte said there will be substantial rate volatility in the future, which "will be against the interests of the consumer."

Aponte denied shippers' claims that Geneva-based MSC aggressively cut freight rates to maintain market share at the start of the industry slump. "It would have been crass and irresponsible for a company in our business to lower the rates," he said.

The leading carriers will emerge strong from the crisis, Aponte predicted.

"I think that the big operators will come out very strong. We will all recover our losses in 2010."

Aponte's forthright comments over the weekend mark a break for the usually reticent MSC which rarely comments on the state of the industry or its own financial position.

Aponte was speaking in Hamburg where movie star Sophia Loren launched the MSC Magnifica, the latest cruise liner to join the fleet of MSC Cruises, the company's ocean cruise unit.

- Bruce Barnard, The Journal of Commerce.