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Focus: Global Supply Chain and Logistics

Our Weekly Feature Article on Topics Related to Global Supply Chain & Logistics

From SCDigest's On-Target e-Magazine

- Dec. 11, 2013 -


Global Supply Chain News: G6 Alliance Carriers to Expand Network to Compete with P3, as Container Shipping Industry Chess Match Gets Interesting

P3 Alliance Operating as if It has Already Achieved Regulator Approval, Federal Maritime Commissioner Says


SCDigest Editorial Staff


The giant P3 alliance among the world's three largest shipping container lines obviously has other carriers worried, as an existing alliance of mostly European carriers has announced plans to expand its coverage areas in a hope to fend off the advantages P3 may bring its three members.

SCDigest Says:


The dynamics here continue to be very interesting, driven of course by slowing trade volumes and chronic overcapacity.

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In June, Maersk Lines, the world's largest ocean container shipping company, formed an alliance with its two next largest competitors (Switzerland's Mediterranean Shipping Co. and France's CMA CGM) to share capacity on major shipping lanes in what it called the P3 alliance.

Of the 2.6 million TEU to be deployed, 1.1 million will be provided by Maersk, 900,000 by MSC, and 600,000 by CMA CGM. That 2.6 million TEU total represents just under 15% of the total global container fleet.

Interestingly and importantly, P3 will actually operate as a separate company, with former Maersk executive Lars Jensen as its CEO. It is an operating company only, meaning it will do no sales or marketing, rather simply focus on effectively running the ships and the network.

The three P3 carriers will continue to fight aggressively for every box - but that container could now be moved on a different carrier's ship under the alliance. The hope is that boxes can be moved at lower cost and more efficiently in terms of service. By combining their volumes on a ship, the hope is also that more of the capacity of the giant vessels such as the Maersk 18,000 TEU Triple-E's can be utilized than going it alone.

This operating-only arrangement is certainly in part to ease concerns among shippers and regulators over the potential reduction in competition from the alliance.

P3 has just recently sought the OK from regulators in Europe, the US and Asia for the move, and its fate is far from clear, though Euro officials are said to be somewhat sympathetic to the overcapacity in the sector and troubled financial prospects for these Euro-based carriers. That said, Euro regulators are frankly known to be tougher than those in the US when it comes to moves that appear to lessen competition, such as its quashing early this year of UPS' attempt to acquire Euro rival TNT Express.

However, there may be push back even in Europe as well as the US, where there is obvious concern.
Bruce Carlton, CEO of the US-based National Industrial Transportation League, said at the group's recent annual conference that NIT League has asked the U.S. Federal Maritime Commission to take a "deep look" at the P3 agreement.

(Global Supply Chain Article Continued Below)



And the FMC is responding. FMC chairman Mario Cordero recently took the unusual step of asking fellow regulators in the European Union and China to join in a "Global Regulatory Summit" in Washington, D.C. to discuss the pact.

FMC commissioner Richard Lidinsky Jr. said the three carriers are moving ahead as if they had already won regulatory approval, even though they have yet to make a "significant" filing with all of the relevant governing authorities. "Pushing behind the scenes and placing positive stories with the press is not a substitute for proper consideration of the consequences of this massive carrier alignment," he said.

G6 Bulking Up in Response

The G6 Alliance was formed in late 2011 and began operation in March 2012 in the Asia-Europe and Mediterranean trade. The cooperation expanded to the trade lanes between Asia and North America East Coast in May 2013.

G6 is comprised of member carriers Hapag-Lloyd, NYK Lines, Orient Overseas Container Line. Hyundai Merchant Marine, APL and Mitsui O.S.K. Lines.

In response to P3 moves, The G6 carriers announced this week that the alliance will up its coverage to 240 container ships serving 66 ports in Asia, America and Europe.

Some 76 ships will be deployed across 12 services connecting 27 Asian and North America West Coast ports. Approximately another 42 ships will be deployed across five services (including two pendulum services) in the Trans-Atlantic trade lane calling at 25 ports covering the US East Coast, US West Coast, Canada, Panama, Mexico, Netherlands, the UK, France, Belgium and Germany.

G6 expects to complete the expansion of services by the second quarter of 2014, pending regulatory approval, to coincide with the launch of the P3 network on the Asia-Europe, trans-Atlantic and trans-Pacific routes. The specific ports to be covered will be announced later.

G6 claims that on the Asia-North America West Coast trade, each alliance member will be able to offer almost twice as many sailings compared to what they could offer separately.

It's no wonder why the G6 is looking to bulk up. Estimates are that the P3 partners will command market shares of 42% on the Asia-to-Europe route, 24% in the trans-Pacific trade, and up to 42% in the trans-Atlantic trade, giving them considerable market clout.

Even before this new service expansion, however, G6 members accounted for 27.1% of US containerized export trade and 28.6% of U.S. containerized import trade in the first nine months of 2013.

The dynamics here continue to be very interesting, driven of course by slowing trade volumes and chronic overcapacity.


How concerned are you relative to the P3 alliance? Are these expanding alliances a good or bad thing? Let us know your thoughts at the Feedback button (email) or section (web form) below.


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