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THE
world's three largest shipping lines, Maersk
Line, MSC and CMA CGM, issued a joint statement
earlier this week announcing a "long-term
operational alliance on East-West trades,
called the P3 Network", in a bid to
improve customer service and operational
efficiency.
But
while improved customer service and a desire
to increase efficiency are admirable goals,
one cannot ignore the potential impact that
this move could make in the wider container
shipping industry. Nor can one ignore the
regulatory interest that will be aroused
accompanying this news.
This
publication in recent months has speculated
that the market is now witnessing a period
of covert consolidation on the mainline
trades that will ultimately leave the Asia-Europe,
transpacific and transatlantic trades with
a much smaller pool of service providers
than what we see today.
This
week's announcement from the "Big 3"
certainly adds greater weight to this assertion....
 click image
to enlarge
Already
Maersk Line operates 15.1 per cent of the
world's container shipping capacity, MSC
commands 13.5 per cent and CMA CGM operates
8.6 per cent, according to Alphaliner.
Collectively
these three lines operate an astonishing
37.2 per cent of the world's container shipping
fleet. As such, any major alliance particularly
on the world's three major trade lanes is
of great significance.
All
three carriers generate most of their business
and revenue on these trades, which would
indicate that their market share could be
even more if we broke it down on a trade-by-trade
basis, particularly Asia-Europe.
Nevertheless,
it is clearly stated in the announcement
that while the vessels deployed on the P3
Network, which will amount to 2.6 million
TEU in capacity across 255 vessels on 29
loops initially, will operate independently
by a joint vessel operating centre, the
three lines will continues to have fully
independent sales, marketing and customer
service functions.
No
doubt this is said in the hopes that it
will keep the attack dogs of the European
Commission at bay, who will certainly be
taking a keen interest in how this alliance
manifests itself.
Shipping
lines know all too well the heavy penalties
they face for collusion. And given the huge
potential market share involved with the
world's three largest shipping lines operating
in close connection with one another regulators
will be keen to ensure that everything is
above board.
With
all of this said it is important to note
that the agreement, as was reported in our
sister publication the Hong Kong Shipping
Gazette yesterday, is not expected to take
effect until the second quarter of next
year and is still subject to approval from
the relevant regulator authorities concerned
with each of the three trades.
It
is also subject to final negotiations among
the three carriers. But the motivation to
get the deal done will be high, given the
potential for significant operational cost
savings.
As
the deal currently stands Maersk will contribute
42 per cent of the capacity to the tune
of 1.1 million TEU; MSC will deploy 34 per
cent of the capacity, or roughly 900,000
TEU, while CMA CGM will contribute 24 per
cent or 600,000 TEU.
Outside
of the regulatory issues this news could
have significant repercussions for other
carriers in these three trade lanes, as
one would imagine that the economies of
scale advantage these three carriers will
enjoy will grow to a new unprecedented level.
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