'Delete this string of emails': bombshell allegations emerge in container cartel case

A pair of US class-action lawsuits has pulled back the curtain on what could become one of the most consequential antitrust cases ever to hit the container equipment sector, alleging that the world's biggest box manufacturers colluded to restrict output, inflate prices and police each other's behaviour during the pandemic supply chain crisis. The complaints, filed in a California federal court - one on behalf of US shipper CA Spalding, and the other on bechalf of trucking firm Daybreak Express - follow a US Department of Justice criminal case against container manufacturing giants including CIMC, Dong Fang, CXIC and Singamas. At the centre of the allegations is the claim that the manufacturers, which together produce 95% of global dry containers, agreed to limit output just as demand for containers surged. According to the lawsuits, executives from CIMC, Dong Fang, CXIC and a co-conspirator met in Shenzhen in November 2019 and agreed to restrict production by limiting factory shifts and working hours, refusing to build new manufacturing capacity and introducing monitoring systems to ensure compliance. The most eye-catching detail is a written agreement allegedly known as the "Shenzhen Moon Gazing Equity Investment Fund", or the "Moon Gazing Fund". According to the Daybreak Express complaint, CIMC circulated a draft of the contract to other defendants in early 2020, before the companies held a ceremony around March 2020 to execute a final version. The fund allegedly included a mechanism to financially penalise any company that cheated on the output-restriction agreement. The complaint also claims the manufacturers installed about 87 surveillance cameras across 49 production lines to monitor whether competitors were sticking to agreed output restrictions. One filing includes a screenshot of surveillance footage allegedly used in a June 2021 audit of production lines. But it is the internal communications cited in the filings that provide the most revealing glimpse into the alleged cartel. After a December 2019 meeting attended by the manufacturers, a Singamas executive allegedly reported that participants had discussed limiting shifts and hours, building "no new production lines", installing CCTV in all production lines and requiring each factory to submit a deposit that would be deducted "if any factory break [sic] the agreement". The executive then allegedly warned colleagues: "I have reminded them not to be high profile since it might violate the Monopoly Law or being accused of price manipulation by our customers." In another exchange, a Singamas board member allegedly reacted to the report by writing: "The discussion appeared to be anti-competition to me. I feel very uneasy reading your report. May be [sic] we should delete this string of emails after reading?" Singamas chief executive SS Teo, who was last month indicted by the Department of Justice over the claims and has had to step down from his roles, allegedly replied: "Yes I feel the same." The lawsuits further allege executives sought to sanitise internal presentations to avoid attracting antitrust scrutiny. In one example, a draft presentation referred to a "Manufacturing sector official and unofficial association/alliance", to which one participant reportedly responded: "Please delete 'alliance' as it is quite sensitive under anti-trust law." Another executive allegedly advised against including references to "market discipline" in an investor presentation because of potential antitrust concerns. Mr Teo allegedly replied that he would amend the slide and "take out" words. The allegations suggest the arrangement became increasingly sophisticated over time. Initially focused on limiting factory operating hours, the alleged conspiracy later evolved into formal production quotas. One presentation cited in the complaint set out "total allowable capacity" and "allowable quota" for participating manufacturers, allocating production volumes among companies and factory lines. Executives are also alleged to have exchanged confidential information through emails, WeChat groups and regular in-person meetings. The complaint claims manufacturers used surveillance footage from rival factories to audit compliance. The alleged conduct did not stop at dry containers. According to the filings, CIMC vice-president Tianhua Huang emailed the chief executive of a competing reefer manufacturer in May 2020, stating that dry container manufacturers had "reached a consensus and established industry self-discipline actions" and suggesting reefer manufacturers should "follow the dry box practice". That proposal included "No capacity increase" and a requirement that "all standard reefer manufacturers run one shift only". The invitation was allegedly rejected, with the recipient responding that "any such coordination is strictly forbidden by the compliance policies" of his company. The alleged conspiracy unfolded during one of the most chaotic periods in container shipping history, when supply chains were stretched to breaking point and equipment shortages became a defining feature of global trade. It also followed one of the worst years for container manufacturers, who issued a slew of profit warnings to investors over 2019's financial performance - CIMC's profit for the year was over 50% down on 2018, while Singamas swung from a $72m profit to a $95m loss in the same period. However, according to the Daybreak complaint, the price of a standard 20ft dry container more than doubled as the pandemic unfolded, rising from roughly $1,600 in 2019 to more than $3,500 by 2021. Prices for a 40ft box are alleged to have climbed from around $2,800 to more than $5,900 over the same period. The lawsuits claim those overcharges were passed through the supply chain, affecting buyers of transport services whose costs incorporated inflated container prices. Manufacturers allegedly enjoyed a windfall. One filing claims CIMC's container manufacturing profits rose from RMB137m in 2019 to RMB11.3bn in 2021, while Singamas recorded a $187m profit in 2021. The financial stakes are potentially enormous. The complaint does not put a dollar value on the claim, but seeks damages, restitution and disgorgement on behalf of a nationwide class. Under US antitrust law, any proven damages may be trebled, significantly increasing any eventual award.

Hormuz traffic rises as US-Iran MoU sparks cautious optimism

Forwarders may be short of confidence following confirmation that the US and Iran have signed a deal to end the war, but there have been green shoots of hope with ocean transits on the up. Both President Trump and President Masoud Pezeshkian confirmed that they had put pen to paper - or pen to touch screen - to sign the document labelled the "Islamabad MoU", which essentially lays out the foundations for negotiation for a comprehensive deal due by August. Under the MoU, both sides have agreed to "declare the immediate and permanent termination of military operations on all fronts, including in Lebanon, and undertake from now on not to initiate any war or any military operation against each other". Further to which, they agreed to "refrain from the threat or use of force against each other, and ensuring the territorial integrity and sovereignty of Lebanon," with this last point proving particularly concerning for forwarders, with news that Israel has continued to strike Lebanon. One source pointed The Loadstar to the news this morning that Israeli strikes had resumed against Lebanon with the words "how fucking long?" contending that they did not believe the deal would result in any material change in the short term. Another forwarding source said that they had been following progress of the negotiations and were left confused as to what the state of play was as a consequence of the announcement made by President Trump in Versailles last night. And while when pressed on whether they thought that long-term deal would materialise, the forwarder responded with "I honestly do not think that any of this will actually transpire," there have been glimmers - albeit small - of confidence improving. A Windward Intelligence assessment noted: "On 15 June, 14 total transits were recorded, marking the highest single day count this month, suggesting confidence is beginning to build, even as the Traffic Separation Scheme is unclear and safety guarantees are not in place." Adding to the sense that things are on the up, Windward noted that between 1-15 June there had been 151 Hormuz transits, compared with 156 over the whole of May, "indicating the pace is already accelerating". IMO Secretary-General Arsenio Dominguezalso welcomed the Islamabad MoU describing it as a "crucial return to peace, dialogue, multilateralism and diplomacy," and a move towards the safe restoration of free navigation along the Strait of Hormuz. Nonetheless, Alphaliner cautioned it is likely that container lines will adopt a "phased rather than immediate normalisation," adding "carriers that suspended or rerouted Gulf calls are unlikely to restore Hormuz transits until the freedom of navigation is demonstrably secure".

Gulf land bridge gains momentum as DHL, Oman Air and GWC expand capacity

Deal or no deal, logistics operators are expanding their Gulf land bridge offerings with DHL, GWC, and Oman Air Cargo all pumping further capacity into the region as shocks from the US/Israeli war against Iran continue to be felt across global supply chains. Oman Air Cargo this week launched a new daily Road Feeder Service (RFS) between Muscat and Dubai, with Qatar-based Gulf Warehousing Company (GWC) introducing a TIR-powered air-to-land logistics corridor for the Gulf. Speaking to The Loadstar on Wednesday, DHL Express' chief executive officer for Europe, Mike Parra, said that he too has noted a marked uptick in demand for the company's regional road freight connectivity in the Gulf. "With what has happened in the Middle East, with all the uncertainty, and with the Strait of Hormuz closure, we have seen a real necessity to leverage not only our heavyweight express product, but to leverage our network," said Mr Parra. "When you have the network we have in the Middle East, on the ground and in the air, and have our capability to pivot - for instance from Bahrain to Muscat and Riyadh, which we did - and our road network in Europe, you become the logistics supplier of choice." DHL may have been one of the early leaders on this pivot to the new Gulf overland trade corridor, but its rapid maturation into an established corridor in just four short months was made possible by determined and speedy work from regional governments. Saudi-based Flow Progressive Logistics' chief executive Achraf Ellili noted that every authority contributed to have the entire ecosystem working together, "meaning things that we thought would take ages to happen have happened in 47 days". Praising the rapid collaboration between GCC countries to improve the customs and border crossing processes for trucks, Saudi Automobile & Touring Association executive manager Hasan Almanasif called for operators to "take advantage" of the opportunity. Oman Air Cargo's launch of its new RFS heeds that call, with the service set to support growing trade flows between the UAE and Oman by trucking goods each way, while also providing customers caught in the chaos options for alternative routings. Head of cargo for the carrier, Michael Duggan, said: "This new service creates greater flexibility for cargo movement between Dubai and Muscat by complementing traditional air freight operations and enabling the transport of a wider range of cargo types. "As regional supply chains continue to evolve, Oman Air Cargo remains focused on delivering reliable, customer-centric transport solutions that support trade across the Middle East." Nor is the carrier alone in tapping up the opportunity - and it is a massive one with demand for RFSs surging 30% in the first three weeks of the war - with GWS' new service, in which it uses its network to coordinate services from regional providers. Of course, the route's long-term prospects continue to be challenged, with expectations that when the war definitively ends, carriers and shippers will revert to their traditional approaches, but hopes of a speedy resolution to the conflict continue to be dashed. Earlier today, news broke that just before boarding a plane to fly to negotiations US vice president JD Vance would no longer be attending the summit in Switzerland as talks had been abandoned. The reason for this cancellation has not yet been made public, but despite the ceasefire MoU signed on Wednesday stressing that attacks on Lebanon by the US and Israel were to halt immediately, Israeli forces have persisted. Indeed, those strikes began almost simultaneously with the news that President Trump had signed the MoU, prompting one forwarder to tell The Loadstar, "How fucking long [was that]?" in reference to the length of time in which hostilities were paused. Such chaos offers the landbridge long-term prospects. Mr Ellili noted that with shippers having now experienced the route's reliability, he expected them to "keep a percentage of their volumes moving this way now that it has been stress tested at scale". "It is optionally now viable. Shippers require a dual corridor strategy and the GCC is now able to offer this. Jebel Ali will remain world class, but it'll no longer be the only gateway. This new one has been stress-tested it is there, and it is complementary," he said.