The Wall Street Journal reports that the U.S. Federal Maritime Association has taken the unusual step to call for a meeting with its European and Chinese counterparts to scrutinize the proposed alliance of the globe’s top three shipping container lines.
Readers may recall that in June, the three lines announced the intent to establish the P3 Network that pools vessels operated by Maersk Line, Mediterranean Shipping Line (MSC) and CMA CGM among the most traveled global routings. According to media reports, the alliance, if consummated, would control 40 percent of total sea cargo capacity that includes an estimated 43 percent of ocean container shipping from Asia to Europe, 24 percent from Asia to the United States, and 41 percent of trans-Atlantic routings. According to estimates from Drewry, the three subject carriers of this proposed alliance control about one-third of the world’s shipping fleet.
Such an alliance requires the approval by the combination of Europe, China and U.S. regulatory groups. The pact calls for a sharing of capacity among the top three carriers with the biggest container ships, the so-termed Triple E vessels, being part of the shared capacity and routing arrangements. If approved, this alliance is scheduled to go into effect in the second quarter of 2014.
According to the WSJ report, the chairperson of the U.S. Federal Maritime Association called for this meeting because of concerns raised by other carriers and the shipping community as a whole. Such a meeting among all three regulatory agencies is unusual and could occur as early as mid-December. Other concerns relate to the impact on smaller shippers as well as the impact to the other ocean container carriers that are not part of this proposed alliance.
Business network CNBC reports that alliances of shipping lines usually involve the pooling of carrier equipment, typically allowing the carriers to offer more frequent service to more ports. But in the case of the P3 alliance, shipping and trade groups lack specifics about both the potential economic and market impacts. These concerns are focused on a restriction of the supply of shipping capacity which could drive ocean container freight rates higher. The CNBC report quotes a statement from U.S. Federal Maritime Commissioner William Doyle as concerned about reports that a combined fleet of 346 vessels will be reduced to 255 vessels once the P3 alliance is consummated.
Needless to state, the unprecedented joint meeting among all three involved maritime regulators is well-timed and could lead to further clarity as to whether the proposed alliance will meet resistance.