P3 Network promises dashed by regulators

   The P3 Network was an interesting concept, although unsettling to many shippers when first announced by the three largest liner carriers – Maersk Line, Mediterranean Shipping Co. and CMA CGM – earlier this year. 
   The three carriers, grappling with absorbing the next-generation mega-containerships to enter the world’s fleet, promised the P3 Network would allow them to introduce greater efficiencies to container shipping in the main east-west trades and ultimately benefit shippers with better service.
   While shippers were apprehensive of the P3 Network at first, many in the U.S. and European trades were interested in the operational benefits the three carriers espoused through the proposed alliance and how it might ultimately affect rates and service levels for them. 
   The biggest obstacle standing in the way of this mega-alliance was the government regulators in the east-west trades. On March 24, the U.S. Federal Maritime Commission decided to allow the P3 Network agreement to become effective in the United States, and on June 3, the European Commission informed the P3 partners that it had decided not to open an antitrust investigation into P3 and closed its file. It appeared the P3 was two steps closer to starting operation in the autumn of 2014.
   However, the P3 needed the approval of the Chinese government to sail forward. The answer came in the form of a resounding “no” from the Chinese Ministry of Commerce on June 17. 
   It could be argued that China was simply looking out for the best interest of the country’s numerous small shippers against potential abuse from an alliance of the three largest container carriers. But the opaqueness of China’s decision leaves many to wonder what the true reasons were for the dismissal. 
   The P3 members had no choice but to cancel their alliance plans and return to business as usual amongst themselves.
   It will be interesting to watch if China’s sinking of the P3 will take the wind out of the sails of other large alliances, namely the G6 formed through the merger of the Grand and New World alliances, and CKYHE, formed when Evergreen joined with carriers COSCO, “K” Line, Yang Ming and Hanjin.
   Shippers could see the demise of the P3 as a victory. But is it in the long run? 
   With the exception of Maersk and two other liner carriers that turned a profit last year [see the “Who’s Making Money” report in this issue, pages 30-35], the industry continues to remain in an unhealthy state. Thus service levels suffer and, beyond slow steaming and skipped sailings, significant innovation remains unattainable. 
   “The overall aim with P3 was to make container liner shipping more efficient and improve service quality for the shippers due to more frequent and reliable services,” Maersk stated. “P3 was intended to be an operational, not a commercial, cooperation.”
   Now, the industry will never know.

This editorial was published in the July 2014 issue of American Shipper.