China blocks the P3 mega alliance

By Finance

The P3 network has been blocked by China. The decision came on Tuesday citing the fact that the mega alliance would have provided more benefits to its members than to its customers.

The P3 was announced a year ago (June 2013) and it would have included A.P. Moeller-Maersk, CMA CGM and MSC. The alliance aimed to cut cost on the major routes (Asia-Europe, trans-Pacific and trans-Atlantic) by establishing a system which allows the companies to use each other ships for cargo transportation (a system as the code-sharing agreements among airlines). The commerce ministry of China said:

"Based on market share, market access and industry characteristics, the concentration will enable [P3] operators to become a close-knit alliance, commanding 47 per cent market share in the Asia-Europe liner service."

He also added that if the alliance had gone ahead, it "would have a far-reaching impact on the global shipping industry and cause a high level of concern in all sectors."

According to analysts, China might have become less tolerant of business agreements that restrict competition. The Asian country has blocked only one merger so far – in 2009 the planned acquisition of Huiyuan (Chinese juice maker) and Coca-Cola.

Responding to the decision of China, Maersk issued a statement:

”Today, the Ministry of Commerce of the People’s Republic of China announced that they have not approved the P3 Network. 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.”

Maersk CMA CGM MSC P3

Photo: Maersk

The chief executive of the Danish company said the decision came as a surprise because it has already been approved by regulators in the U.S. and Europe. According to him, it would have resulted in reducing carbon emissions and costs, but he is quite confident that Maersk will accomplish those improvements anyhow.

Tobias Stig, bank analyst with Germany’s MainFirst, said:

”Maersk is the one that suffers the least from this drawback because they have the highest margins.”