Wednesday, June 18, 2014
China rejects P3 and Maersk says it’s over
China shocked the shipping industry Tuesday by rejecting the alliance of the three largest global container lines, after U.S. and EU regulators had approved it.
Nils Smedegaard Andersen, CEO of A.P. Moller-Maersk, which saw its shares fall the most in two years after the news broke, said that since the company has no alternative plan it will now "give up on P3," the proposed vessel-sharing plan between Maersk Line, CMA CGM and MSC.
The Commerce Ministry said Tuesday that although the P3 plan would have benefited the three shipping giants, it might be at the expense of other operators, and would "restrict competition" on the busiest Asia-Europe trades. It noted that in "numerous discussions" the shipping giants had failed to prove that the positive elements would outweigh the likely adverse impact. The three companies control a combined 46.7 percent market share, it said.
"The decision does come as a surprise," Andersen said. "I did not foresee problems in China. We only received what I would call positive feedback."
The three shipping lines had said in June 2013 they would create an operational pact to reduce costs on Asia-Europe, trans-Atlantic and trans-Pacific trade routes.
"We thought it was a good proposition and would allow us to get cost out and reduce fuel consumption," Smedegaard told Bloomberg by phone. "There was no impact on the market side. We never saw this as consolidation and neither did the U.S. and Europe."
"The surprise here is that China has not approved this plan even after regulators in the U.S. and European Union have given it the go-ahead," said Lawrence Li, China transportation analyst at UOB Kay-Hian Investment Consulting in Shanghai. "And antitrust laws there are tougher."
Drewry Maritime Research analyst Neil Dekker said P3 was so large that plans for fleet deployment and a London control center would have been well advanced, but Smedegaard shrugged it off.
"P3 would have been nice to have but it’s not a must-have," he said. "Maersk is in a very strong position. We are very competitive and making very good profits."
For more of the Bloomberg story: www.bloomberg.com
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