China vetoes P3 shipping alliance
July 1, 2014 Category Logistics, Ports & sea transport
The Chinese government announced it was blocking a proposed tie-up among global shipping firms on competition concerns. Denmark’s AP Moeller-Maersk, France’s CMA CGM and the Swiss MSC Mediterranean Shipping Co – the world’s three biggest ocean carriers – unveiled plans for their so-called P3 Network in June last year. The aim was to use a combined fleet to cut costs on Asia-Europe, trans-Atlantic and trans-Pacific routes. But China’s Ministry of Commerce (MOFCOM) said in a statement that it had decided to prohibit the alliance after conducting an anti-trust assessment. The Ministry said the alliance, had it gone ahead, would “have a far-reaching impact on the global shipping industry and cause a high level of concern in all sectors.” It added that the alliance would increase the parties’ “combined capacity in container shipping on Asia-Europe routes” and give them a “substantial increase in market concentration.” In response to China’s decision, the companies said they were giving up the plan. The alliance had already been approved by regulators in Europe and the U.S. and would have enabled the participants to reduce costs and carbon emissions. China’s decision sent AP Moeller-Maersk shares tumbling the most in two years. “The decision does come as a surprise to us,” Maersk Chief Executive Nils Smedegaard Andersen said in a statement from the Copenhagen-based company. “The partners have worked hard to address all the regulators’ concerns.” Container lines have been battling overcapacity after a boom in ship orders collided with the global financial crisis, triggering the worst slump in prices for the carriage of cargo since containerization became global in the 1970s. The companies had planned to commit 255 vessels deployed on 29 trade loops to a joint center that would have run a combined fleet independently. Maersk, which transports about 15% of all the world’s containers, was slated to contribute 42% of the total, including its Triple-E class largest-ever container ships with a capacity of 18,000 boxes. The three companies have a combined 46.7% market share.
It was the first time China had blocked a proposed alliance involving solely foreign entities. “The main purpose is to protect the overseas development of domestic shipping companies,” said Jiang Yuechun, Director of the Department for World Economy and Development Studies at the China Institute of International Studies. Mario Mariniello, Economist at the Brussels based think tank Bruegel and a specialist in competition policy and regulation issues, said China has so far taken an overwhelmingly supportive stance as over a five-year period Beijing cleared 97% of mergers it reviewed, while most of the rest were approved with conditions. Just a single merger – between Coca-Cola and Chinese beverage maker Huiyuan – was blocked in 2009.
Beijing’s veto is good for the logistics industry as it preserves competition among container carriers, according to Klaus-Michael Kuehne, the German billionaire who owns the world’s largest sea-freight forwarder. “The infinite wisdom of the Chinese has helped to ensure that competition between the leading shipping companies will continue to exist,” Kuehne said. “From the point of view of the logistics industry and our trade and industry customers, this is good news in every respect.” Kuehne is the majority owner of Swiss-based Kuehne & Nagel International and also owns 28.2% of Germany’s biggest container line, Hapag-Lloyd. Kuehne & Nagel has closed 40 locations at its contract-logistics unit and is trying to turn around its overland business as cost cuts helped profit to climb 12% to CHF150 million in the first three months of the year. Hapag-Lloyd’s first-quarter loss widened as the takeover of Chilean rival Cia Sud Americana de Vapores (CSAV) drove up costs and freight rates remained under pressure.
- KURT VANDEPUTTE (UMICORE) APPOINTED CHAIRMAN OF THE BOARD OF THE FLANDERS-CHINA CHAMBER OF COMMERCE (FCCC)
- Webinar: “Knowing Your Chinese Partner” – May 26, 2021, 10 am – 12 am
- EMA starts rolling review of CoronaVac, WHO approves Sinopharm vaccine for emergency use
- The Global Times warns not to politicize the Comprehensive Agreement on Investment (CAI)
- Hainan to become biggest duty-free market in the world