24 November 2013

[241113.EN.SEA] Asian Shippers Council Fears P3 Will Make The Market More Volatile

THE Asian Shippers Council (ASC) says the P3 mega alliance of Maersk, MSC and CMA CGM is too big and will bring with it greater market volatility.

The ASC said P3 would be far bigger than any other alliance in terms of the number of ships, size of ships' sailing frequency and port coverage, and could accelerate the demise of smaller players, which would increase market volatility.

"Such a concentration of capacity is untenable," said ASC chairman John Lu. "We fear the worst should the regulatory authorities give its approval. With fewer service providers, we can only imagine what effect this will have on freight rates and service levels."

The ASC said the problem could be exacerbated if competitors tried to match the P3 Network by ordering larger ships and expanding fleet sizes. That would worsen the supply-demand imbalance and "bring about price wars and rate volatility".

Said China Shippers' Association vice-chairman Cai Jia Xiang: "Businesses like certainty to allow us to plan ahead, but the shipping environment is anti-certainty. Already, shippers have to put up with fluctuating freight rates, longer lead times and service cancellations."

The proposed alliance will consist initially of 252 ships totalling 2.6 million TEU deployed in the Asia-Europe, transpacific and transatlantic trades with an estimated 42 per cent market share on the Asia-Europe route, 24 per cent on the transpacific and 40 per cent transatlantic.

The ASC described Maersk Line, Mediterranean Shipping Co and CMA CGM as "audacious" for moving forward without regulatory approval.

"Offices are being set up in London and Singapore - the two centres with no regulatory oversight - and the service was announced on the MSC website. There has also been a string of articles justifying the need for P3 in the media," said the ASC.

The statement referred to remarks by US Federal Maritime Commission commissioner Richard Lidinsky, who said the alliance was moving forward without regulatory approval.

The ASC supported the FMC's decision to invite regulators in the European Union and China to a summit in Washington to discuss the P3 Network. No further details on the summit have emerged.

"The P3 is not a done deal - not by a mile - whatever the alliance may think. We are delighted that the FMC has initiated the meeting of regulatory authorities," Mr Lu said.

The FMC has extended the deadline by 20 days to November 29 for concerned parties to submit comments on the P3 Network.

The alliance has received a mixed response from shipper organisations. The Global Shippers' Forum supports vessel-sharing agreements as long as the carriers pass efficiency gains on to customers. Meanwhile, the European Shippers' Council said that in principle it had nothing against the alliance as long as it did not impact shippers' choice in terms of price, service level and routing.

Source : HKSG.

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