P3: Great expectations dashed, but G6 and other networks sail on
SOME take China's rejection of the P3 mega alliance at face value, that an operational union of Maersk, MSC and CMA CGM, was just too big to be anything other than a threat to competition.
Others ascribe protectionist motives, seeing a will to shield Cosco, the fifth largest box shipping line and China Shipping, the ninth largest, from a combine of the world's first, second and third biggest.

But there was also a consensus that smaller G6 alliance that was to be P3's chief rival among the networks, would not encounter regulatory trouble because of its structure and smaller size.

The P3 rejection marks the first time China blocked a proposal by foreign firms since its anti-monopoly regulator was granted greater powers six years ago, said Reuters.

Taking the Ministry of Commerce ruling at face value, Norton Rose Fulbright anti-trust lawyer Marc Waha said: "This industry is very important for China, which is the manufacturing powerhouse of the world. It is very important that shipping remains competitive."

Taking a darker view, Barclays analyst Jon Windham said: "China's rejection of the P3 is more an effort to insulate Chinese shipping companies, from competing with a more effective rival than it is an effort to maintain industry fair play."

But grateful China Shippers Association (CSA) vice-chairman Cai Jiangxiang said: "We're very happy, we think it's a fair result. All the small and medium firms are very happy because they were worried about being squeezed out by P3."

Of the G6, made up of APL, Hapag-Lloyd, Hyundai, MOL, NYK and OOCL, Lloyd's List said Beijing shared the view of US Federal Maritime Commissioner Richard Lidinsky, who cast a no vote against P6 in March.

But Mr Lidinsky admired the G6: "From the organisational chart, multi-diverse membership, rotating chairmen, vessel-sharing agreement terms and flexible operational procedures, it is well-equipped to serve the international waterborne commerce of the US in a fair and efficient manner," he said.

An industry source told Lloyd's List that the G6 Alliance was not expecting P3 trouble because it was already operational on the Asia-North Europe, Asia-Mediterranean and transpacific east coast trade lane.

The G6 is only expanding onto the transatlantic and transpacific west coast, unlike the P3, which is a new start-up. What's more, only part of the G6 expansion, the transpacific west coast move, affects China.

SeaIntel analyst Kasper Hansen said another factor was that the G6 centre in Singapore would work more like a co-ordination centre, while the proposed P3 would act for like a manager of fleet operations.

The implications for Maersk, CMA CGM and MSC are less clear, said the UK's Transport Intelligence. P3 was an attempt to drive-down costs and thus improve margins, something that remains an imperative for all players.

"Its success was far from assured as the three companies have very different business cultures, yet the attractiveness of such a big move was the potential for major cost reductions combined with the potential for increases in market share," said Ti analyst Thomas Cullen.

In the short-term the urgency may have eased as Maersk seems to have established a cost-competitive. This suggests that CMA CGM and MSC may be under greater pressure to look for other solutions, he said.

Said a CMA CGM statement: "With a presence on every continent through its network of 650 agencies, the group will continue to deploy a strategy combining innovative transport solutions, financial discipline and excellence in customer service. CMA CGM is confident that it will maintain its operating performance and continue to over-perform the industry."