Three Largest Ocean Carriers Propose Alliance (11/5/2013)

In a move that will affect shipping throughout North America, Europe and Asia, the world’s three largest ocean carriers have announced plans to form an alliance. Under the terms of the agreement – dubbed the P3 alliance – Maersk Line, CMA CGM Group and Mediterranean Shipping will share ships and port facilities in hubs like Rotterdam, Shanghai and Los Angeles – where many promotional products routinely arrive.

“The three things the P3 gives us are coverage, frequency and stability,” said a Maersk spokesperson. “That’s the value it provides not just us, but our customers as well.”

Supporters of the alliance claim that by sharing resources shippers will be able to keep costs low. Those who question the alliance wonder if the potential for fewer ships and routes will instead drive costs to ship goods higher. “One of my concerns relates to media reports that a combined East-West fleet of 346 vessels will be reduced to 255 vessels once the proposed alliance is consummated,” said Federal Maritime Commissioner William Doyle, in a statement.

In the past, shipping alliances have generally been formed by carriers to improve delivery times along limited, specific routes. The P3 alliance, though, would impact a full 43% of the Europe-Asia shipping traffic, at least 40% of the trans-Atlantic market and 24% of trans-Pacific deliveries, according to data from the Federal Maritime Commission (FMC), which is based in the U.S.

Adding to the confusion, the world’s biggest carriers have recently ordered more fuel-efficient, but larger ships, giving analysts pause about how the market will absorb the P3 deal. That’s because, in comparison to stronger economic times, global shipping remains depressed, as supply currently outweighs demand for services.

Several regulatory agencies, including the FMC, are reviewing the proposed P3 alliance and could decide to try to block the deal. If the alliance gains regulatory approval, however, it is likely to go into effect by next spring.

source: ASI Industry News

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