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World’s Largest Container Shippers Plan Monster Alliance

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June 18, 2013

Image credit Maersk Line

reuters logoBy Mette Fraende and Stine Jacobsen

COPENHAGEN, June 18 (Reuters) – The world’s three biggest container shipping companies, including Maersk Line, have agreed to share vessels in a bid to minimize losses caused by over capacity and falling freight rates.

Maersk Line, the world’s biggest container shipping operator, a unit of Danish shipping and oil group A.P. Moller-Maersk said on Tuesday it has agreed an operating alliance with its two biggest rivals, Switzerland-based MSC Mediterranean Shipping Company S.A. and France’s CMA CGM.

The three groups, which together account for just short of 40 per cent of global container capacity, aim to start offering sailings on each others ships via a joint operating centre in the second quarter of next year.

The alliance would need approval from EU competition authorities, as well as regulators in other countries including the United States, China and Brazil, Maersk said.

Container shipping, which transports goods such as electrical appliances, furniture, textiles and toys, has been battered by over capacity, weak economies and cut-throat competition.

Freight rates for transporting standard 20-foot containers from ports in Asia to Europe, one of the world’s busiest trade routes, have plunged around 60 percent since mid-March as a result of a price war.

“Declining volume growth and over-capacity in recent years have underlined the need to improve operations and efficiency in the industry,” Maersk Line said.

Last week, the company unveiled the world’s biggest container ship, hoping a new fleet of super-size vessels will deliver savings and return it to profit.

Analysts said the companies will likely face difficulties in getting regulatory clearance for their alliance.

“After all, this is about 40 percent of the world’s container capacity now forming an alliance,” Sydbank analyst Jacob Pedersen said.

“It would be naive to answer no to the question as to whether they will run into problems,” Pedersen said.

Alm Brand analyst Jesper Christensen said regulators could impose conditions on the arrangement.

Maersk Line said it has had initial talks with competition authorities in the EU, the United States and China and is confident the alliance will be cleared.

The alliance, to be called the P3, will consist of 255 vessels with a total capacity of 2.6 million Twenty Foot Equivalent Units (TEU), serving the Asia-Europe, Transpacific, and Transatlantic (North Europe and Mediterranean) routes, Maersk Line said.

Maersk Line will contribute more than 100 vessels and the three lines will continue to have fully independent sales, marketing and customer service functions.

Shares in A.P. Moller-Maersk traded up 3.1 percent at 0947 GMT against a 0.1 percent rise in the Copenhagen stock exchange benchmark index. (Additional reporting by Gus Trompiz in Paris; Editing by Erica Billingham)

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