From SCDigest's On-Target e-Magazine
- June 17, 2014 -
Breaking Global Supply Chain News: P3 Alliance is Dead, as China Says No
Maersk CEO Quite Surprised by Decision; Are Other Alliance Moves Dead Too?
SCDigest Editorial Staff
In stunning news, Chinese regulatory authorities have vetoed plans for an alliance among the world's three largest container shipping lines, apparently killing the idea entirely.
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An analyst at Drewry Shipping wonders if there might now be a comeback plan that would be more like a "P2" alliance between just a pair of these erstwhile partners.
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What Do You Say?
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The Chinese Ministry of Commerce said on its website that the proposed P3 Network vessel-pooling consortium between Maersk Lines, Mediterranean Shipping Co., and CMA CGM, would "restrict competition" on the busiest Asia-Europe container routes.
The "closely coordinated joint operations" proposed in P3 would also have been substantially different from the "loose cooperation" that characterizes current alliances, the ministry added.
That after the plan had received regulatory approvals from US and European authorities in recent weeks, and which came very much as a surprise.
Maersk accepts China's verdict and with no alternative plan in hand it will now "give up on P3," said Maersk Chief Executive Officer Nils Smedegaard Andersen.
Andersen also told Bloomberg that "The decision does come as a surprise. I did not foresee problems in China. We only received what I would call positive feedback."
Under the P3 arrangement, announced just about one year ago, the three carriers would have marketed and sold container shipping services independently. But, any given container could move on a ship from any of the three carriers.
P3 was set up as an operating company only, to reduce concerns from shippers about the arrangement. Despite the expressed concerns of many shippers and shippers groups, the US and Euro approvals sailed through.
The three carriers had hoped to gain operational efficiencies by more consistently filling their ships on the combined volumes, and being able to use the newest generation of megaships, such as the giant Maersk Triple E vessels capable of carrying some 18,000 TEU, and which can enable lower cost per container moved.
Combined, the P3 Network would have controlled about 15% of global container capacity. The three carriers would have continued to run other of their ships outside the network.
Maersk, the only public company among the three members of P3, saw its stock take a pounding on the news, down about six percent on the day.
(Global Supply Chain Article Continued Below)
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The Chinese decision now brings into question other moves in the industry, designed in part to react to the perceive threat and clout of P3.
