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P3 Network vessel-sharing agreement won’t be contested in Europe, report says

By Jeff Berman, Group News Editor
June 05, 2014

Earlier this week, a report in Seatrade Global News stated that the European Commission told parties in the P3 Network vessel-sharing agreement that it will not open anti-trust proceedings, which will, in turn, allow P3 to remain compliant with EU competition law.

The objective of P3 is to give ocean carrier heavyweights Maersk, MSC, and CMA CGM the ability to discuss and agree on the size, number and operational characteristics of vessels to be operated on transatlantic and transpacific trade lanes between the U.S. and Asia, North Europe and the Mediterranean.

Originally established in June 2013, P3 had the intention of kicking off operations by the middle of this year.  But CMA CGM officials said in May that operations are now expected to commence this fall.

P3 is subject to the receipt of relevant regulatory clearances. As LM reported in March, the United States Federal Maritime Commission (FMC) signed off on P3 to become effective in the U.S., adding that at this time the “P3 partners continue their close cooperation with competition and maritime authorities in Europe and Asia to address questions and to explain the nature of P3.”

The P3 network agreement also includes the Asia-Europe trade, which is not subject to the Shipping Act or FMC jurisdiction, but it has yet to be formally approved in China.

CMA CGM said that the P3 Network was required to conduct a self-assessment and since it ended the P3 partners have been in voluntary discussions with the European Commission to confirm the P3 partners’ view of P3 being in compliance with EU competition law.

The ocean carrier added that the P3 partners “are pleased with the Commission’s communication” and “will now continue their close cooperation with competition and maritime authorities in amongst others China and South Korea to address questions and to explain the nature of P3.”

Ben Hackett, principal of maritime consultancy Hackett Associates, said in an interview that the European Commission essentially decided not to disagree, or stand in the way of P3 moving ahead.

“It is nothing major,” he said, “in a sense, it is basically telling the P3 partners to ‘go ahead and do it,’ and are now waiting on China to be followed by a likely formal launch in the third quarter. It is an expression of no objection.”

In terms of what shippers can expect from P3 when it is up and running, Hackett was optimistic about improved services in terms of overall reliability. As for rates, he said things will likely remain the same for about the next six months, but that could change when the carriers are better managing capacity, which remains too high in maritime trade lanes.

A recent Wall Street Journal report stated that if the alliance is approved, industry executives estimate the companies will control as much as 40 percent of total cargo moved in containers from Asia to Europe, and across the Pacific and Atlantic oceans.

And it added that the three carriers agreed to jointly deploy 255 vessels among them, sharing capacity of 2.6 million containers along some of the world’s busiest sea routes.

What’s more, the report said P3 will allow them to cut costs by using one another’s ships and port facilities and leverage each shipping company’s geographic strengths to move cargo faster and more cheaply.

According to Drewry Maritime Research, competitors of the P3 alliance will introduce only moderate capacity growth in its forthcoming schedules between Asia/Europe and Asia/North America, but its new services are a stark reminder of the “awesome” size of Maersk/MSC/CMA CGM’s combined resources.

CMA CGM cited the following as significant benefits of P3:
-operational efficiencies due to improved port productivity, network optimization and cargo consolidation;
-more direct services due to more port pair connections;
-increased flexibility due to the combined capacity of P3 making it easier to increase or move capacity to meet short-term, sudden changes in demand; and
-cost savings and environmental benefits

About the Author

Jeff Berman headshot
Jeff Berman
Group News Editor

Jeff Berman is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis. .(JavaScript must be enabled to view this email address).


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Article Topics

News · Ocean Shipping · P3 · All topics

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