The shipping sector has always had a strong attraction to ‘agreements’ between shipping lines. Despite continued hostility from various regulatory authorities, it appears the allure of such agreements has not disappeared.
The latest initiative is a “long-term operational alliance on East – West trades” between Maersk Line, MSC Mediterranean Line and CMA CGM to be called “the P3 Network”.
According to a statement by Maersk, rather than being a traditional conference type structure, the “P3 Network vessels will be operated independently by a joint vessel operating centre, the three lines will continue to have fully independent sales, marketing and customer service functions.” The alliance will have an initial capacity of 2.6m TEU and will be divided on a basis of Maersk providing 42% of the capacity, MSC 34% and CMA CGM 24%. However, interestingly, Maersk states that its ‘Daily Maersk’ service will be available “to those customers requesting it.”
The scope of the alliance is very substantial with the dominant Asia-Europe, Trans-Pacific and Trans-Atlantic trades being covered by the P3 Network.
Diego Aponte speaking to Lloyds List described the move as a “no-brainer”, and, bearing in-mind the dire state of freight-rates, it is not surprising that even the largest container shipping line is looking for dramatic changes to improve profits.
However, the sheer scale of P3 may have the seeds of its downfall. The three lines concerned are retaining their sales operations, suggesting that the ‘network’ is essentially focused on operational efficiency leading to better asset utilisation. Nonetheless, it appears likely that it will have a significant impact on the structure of the market.
It is unclear if the partners will co-ordinate pricing, however slot-sharing on this scale must lead to a convergence in terms of service levels. Although competition is fierce, with no shortage of lines servicing these routes, the P3 Network will achieve something approaching market dominance with around a third of all capacity, a proportion which may be greater on some specific routes.For regulators, the key question will be ‘does this new network have the ability to influence or control prices’? If so, there might be resistance from competition authorities, let alone from their customers.
GLOBAL SUPPLY CHAIN INTELLIGENCE (GSCi)