China rejects P3 alliance
The Chinese Ministry of Commerce (MOFCOM) announced on Tuesday that it has decided not to approve the planned large-scale alliance between the three largest carriers in the world, Maersk Line, CMA CGM, and MSC, says Maersk in a corporate statement.
According to Maersk, the decision follows a review under China's merger control rules.
"The Partners take note of and respect MOFCOM’s decision. Subsequently, the Partners have agreed to stop the preparatory work on the P3 Network and the P3 Network as initially planned will not come into existence. The lack of implementation of the P3 Network will have no material impact on the Maersk Group’s expected result for 2014," says Maersk.
The announcement likely comes as a huge surprise to many industry players and observers, as the network agreement has been cleared by US Federal Maritime Commission, FMC, and as recently as early June the EU Commission announced that it had no objections to the 3 alliance, though the Commission would keep a close watch on the collaboration to ensure compliance with competition rules.
Several analysts have recently predicted that the major alliance would result in an overhaul of the entire container market and create a player that would be able to dominate the other carriers.
China saw P3 alliance as a merger
The world's biggest and most comprehensive container alliance ever, the P3 alliance, was ruled out because the Chinese saw the agreement as constituting a de facto merger between the three European carriers, Maersk Line, CMA CGM, and MSC, says Maersk Line Trade and Marketing Officer Vincent Clerc, who for the past two and a half years has served as the Danish carrier's chief negotiator along with the two European shipowning families, Aponte from Swiss MSC and Saade of French CMA CGM.
"According to Chinese jurisdiction P3 was considered a merger. This differs from the opinion of authorities that have so far dealt with the alliance. But there's nothing we can do about that. This is the decision of a sovereign state, and that's why P3 will not be realized," says Vincent Clerc.
Smedegaard: Chinese decision is a surprise
The Chinese authorities' decision to reject the massive collaboration between Maersk Line, CMA CGM and MSC comes as a surprise to Group CEO Nils Smedegaard:
"The decision does come as a surprise to us, of course, as the partners have worked hard to address all the regulators’ concerns. The P3 alliance would have enabled Maersk Line to make further reductions in cost and CO2 emissions and not least improve its services to its customers with a more efficient vessel network," he says in a statement:
"Nevertheless, I’m quite confident Maersk Line will accomplish those improvements anyway. It has delivered on those improvements over the last five quarters in the absence of P3 and I’m confident it will continue to do so."
Maersk Line's Trade and Marketing Officer Vincent Clerc is also surprised, and he says in the statement that the carrier has been working hard with the Chinese authorities.
"So of course it is a disappointment. P3 would have provided Maersk Line with a more efficient network and our customers with a better product," he says.
Maersk Line stresses in the statement that the carrier has been working with China for more than 80 years and that the company will continue to work with the Chinese authorities.
Has done very well
In a comment Fearnleys Securities says about the decision:
"Maersk Line has done exceptionally well in recent years in cutting costs and improving margins, and has consistently out-performed peers. The company does not expect the lack of implementation to have any “material impact on the Maersk Group's expected result for 2014”. We believe that today’s announcement is negative for the company’s share price development in the short term, but make no revisions to our earnings estimates for the year."
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