FMC Chairman: Industry seeks consolidation
Within the next four weeks the US Federal Maritime Commission (FMC) in Washington, DC, will present a decision that will likely set completely new standards for global container shipping.
By March 24th, at the latest, the FMC will determine if the Commission will seek to have the agreement blocked in court, or place specific conditions under which the P3 Network will be allowed to operate, or whether the alliance gets a simple "Go."
At this time a team of US officials are working exclusively on determining if the competitive impact of the proposed P3 Network Agreement between Maersk Line, MSC, and CMA CGM is likely - by a reduction in competition - to produce an "unreasonable" decrease in transportation services or an "unreasonable increase in transportation cost".
Five people will decide
Once the analysis is complete, the decision is in the hands of FMC Chairman Mario Cordero and the four other members of the Commission.
So far, only tiny indications by the FMC have signaled the outcome of the process. And so far things point toward a “Yes” more than a “No”. Like when Mario Cordero in January told ShippingWatch that: “Clearly, it appears the industry is moving towards an alliance model, it is something we look at.”
Jørn Hinge: Alliance must bring clear benefits to UASC
Because the fact is that alongside the process to have the P3 Network approved - a collaboration that was announced in June 2013 - the industry is rapidly moving closer and closer together to what looks set to shape three huge alliances covering 90 percent of global container shipping:
P3, G6 and what will eventually be the new CKYH alliance.
Last week Evergreen announced that the Taipei-based carrier joins the Asian alliance. According to ShippingWatch's sources, United Arab Shipping Company is already conducting negotiations with CKYH members with the aim to join the alliance.
Need for efficiency
When Mario Cordero spoke at the Port Productivity Conference in Fort Lauderdale, Florida recently he again underlined the need for cooperation. He also noted that the operational consolidation is already on the rise, and then he pointed out the emergence of several new carrier alliances within the industry.
“Such moves are primarily a response to the ever increasing size of new ships and the need for consolidation to maximize their usage. As a result, U.S. ports need to find ways to deal with the attendant surges in cargo volumes that will begin arriving with these ships. In order to keep up with the improved international service networks provided by liner companies, ports will have to facilitate cargo flows and prevent logistical bottle-necks,” he said.
When the FMC commenced the review of the P3 Network Agreement after it was filed with the Commission in the middle of October last year, the Commission raised concerns regarding the magnitude and perspectives of the alliance and how it could ultimately affect consumer prices in the USA. Since then, the competitive bodies of China and the EU have met at the FMC Summit in Washington, DC, a meeting that led to, among other things, a better understanding among the officials from the three continents.
And it also seems that an understanding of the cost savings created by the P3 Network has emerged.
A decision that will impact many
In the end, it is up to the FMC and its Chinese counterparts to give the approval of the P3 for their respective countries’ regulatory process. The EU does not have to approve the alliance.
The decision implicates more than just the three carriers working together by sharing capacity on their vessels: Service networks all over the world. Habour facilities. Access to transportation. Prices per teu. Productivity. Effectiveness. CO2 emmissions. And much can be affected from the decision of the FMC in Washington.
By April 6, the FMC will decide the fate of G6.
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