Monday, July 14, 2014

Top Story

Analysts: Beijing likely to approve Maersk Line-MSC vessel sharing deal

Photo Credit: Bloomberg

Maersk Line and Mediterranean Shipping Company, the globe’s largest container lines, have formed a new vessel-sharing agreement following the demise of their proposed P3 Alliance with CMA-CGM that China failed to sanction.

Analysts said the carriers have a better a chance of gaining Chinese approval with the new model because it involves fewer ships, less volume and is structured differently than the P3 alliance.

"This one is only a vessel sharing agreement. The P3 plan included an operating company which was the main reason why Chinese regulators looked at it as a merger," Maersk Line CEO Soren Skou said to Reuters.

MSC and A.P. Moller-Maersk said 185 ships would be shared, including 20 of Maersk's giant Triple-E ships, with an estimated capacity of 2.1 million TEUs. The companies said sharing vessels would cut costs, fuel usage and emissions.

The vessel-share agreement would be active on the trans-Atlantic, trans-Pacific and Asia-Europe trades and the combined capacity share under this deal would be below 30 percent in routes between Asia and Europe, Skou told Reuters. The projected market share of the P3 alliance was estimated at 40 percent.

Skou said the Chinese Ministry of Transport would look at the deal this time, noting the Commerce Ministry had investigated the P3 agreement.

Maerk’s stock went up 2 percent Thursday on the news.

"They are obviously less ambitious with this deal," said Credit Suisse analyst Neil Glynn. "I would be surprised if Maersk Line didn't have a very strong idea of what regulators would and wouldn't approve based on their P3 experience."

"By not having CMA CGM in this new vessel sharing agreement, the existing (vessel sharing) agreement between CMA CGM, United Arab Shipping Company and China Shipping Container Lines can continue," said Lars Jensen of maritime analysis company SeaIntel. "As a consequence, pressure on Chinese container shipping companies is not as big as if P3 was approved."

For more of the Reuters story:

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