Join our crew and become one of the 110,527 members that receive our newsletter.

Maersk and MSC Attempt New Sharing Agreement

Maersk and MSC Attempt New Sharing Agreement

Reuters
Total Views: 15
July 10, 2014

(c) REUTERS/Michael Kooren

reuters_logo1BBy Ole Mikkelsen

COPENHAGEN, July 10 (Reuters) – The world’s top two container shippers, Maersk Line and MSC Mediterranean Shipping Co, have struck a fresh vessel-sharing agreement after a previous three-way pooling deal known as P3 was undone by China’s failure to approve it.

Maersk and MSC say sharing vessels cuts costs, fuel usage and emissions. But critics, including those sending cargo, fear the shippers could dominate key trade routes carrying consumer goods around the world.

Analysts said the shippers had a better a chance of gaining Chinese approval with the latest deal because it involves fewer ships and volumes of goods and is structured differently.

In statements issued on Thursday, MSC and A.P. Moller-Maersk, the parent company of Maersk Line, said 185 vessels would be shared, including 20 of Maersk’s giant Triple-E ships, with an estimated capacity of 2.1 million 20-foot equivalent units (TEU).

They will run the trans-Atlantic, trans-Pacific and Asia-Europe routes, critical paths in the global trade of goods.

Last year’s deal – between Maersk, MSC and France’s CMA CGM – aimed to share about 250 vessels and would have had more than 40 percent of Asia-Europe and trans-Atlantic trade and 24 percent of the trans-Pacific market, according to industry estimates.

It was rejected by Chinese regulators who said they did not believe consumers’ interests would be sufficiently protected against the domination of the three shippers.

The combined capacity share under this deal would be below 30 percent in routes between Asia and Europe, Maersk Line CEO Soren Skou told Reuters.

“This one is only a vessel sharing agreement. The P3 plan included an operating company which was the main reason why Chinese regulators looked at it as a merger,” Skou told Reuters.

He said the Chinese Ministry of Transport would look at the deal this time: P3 had been investigated by the Commerce Ministry. Calls to both ministries were not answered.

CHINESE RIVALS

Maersk’s share price jumped 2 percent at the start of trading on the Copenhagen stock exchange. By 13:50 a.m. CET (1150 GMT) shares were up 0.22 percent at 13,450 Danish crowns compared to a 1.1 percent loss in the main Copenhagen index. Swiss-based MSC is not listed.

“They are obviously less ambitious with this deal,” said Credit Suisse analyst Neil Glynn. “I would be surprised if Maersk Line didn’t have a very strong idea of what regulators would and wouldn’t approve based on their P3 experience.”

Lars Jensen from Copenhagen-based maritime analysis company SeaIntel said by dropping CMA CGM, Maersk and MSC should placate any Chinese fears for its own shipping container industry.

A vessel sharing agreement between CMA CGM, United Arab Shipping Company and China Shipping Container Lines is already in place on the world’s busiest freight route from Asia to Europe. That agreement was expected to fall apart if the P3 alliance went ahead, Jensen said.

“By not having CMA CGM in this new vessel sharing agreement, the existing agreement between CMA CGM, United Arab Shipping Company and China Shipping Container Lines can continue. As a consequence, pressure on Chinese container shipping companies is not as big as if P3 was approved,” he said.

CMA CGM declined to comment while reaction from the Chinese shipping industry was mixed.

Cai Jiangxiang, vice-chairman of the China Shippers’ Association which had lobbied the government to block the P3 alliance, drew a distinction between the capacity share and actual market share, which he said may end up being higher.

“We need international shipping regulators to investigate whether their market share will be above 30 percent,” he said. “If they’re able to utilize their capacity really well, they could grab a higher market share, even like 60 percent.”

But John Lu, a former chairman of the Asian Shippers’ Council, said the fact that there will be no commercial links between Maersk and MSC should ease fears of any potential of their collusion on freight rates.

“So long as the (agreement) is accepted by the market it will be good news because it will provide better services,” with more sailings and services to more ports, Lu said. (Additional reporting by Shida Chayesteh in Copenhagen, Keith Wallis in Singapore, Brenda Goh in Shanghai and Gus Trompiz in Paris; Writing by Sabina Zawadzki; Editing by Sophie Walker)

(c) 2014 Thomson Reuters, All Rights Reserved

Unlock Exclusive Insights Today!

Join the gCaptain Club for curated content, insider opinions, and vibrant community discussions.

Sign Up
Back to Main
polygon icon polygon icon

Why Join the gCaptain Club?

Access exclusive insights, engage in vibrant discussions, and gain perspectives from our CEO.

Sign Up
close

JOIN OUR CREW

Maritime and offshore news trusted by our 110,527 members delivered daily straight to your inbox.