China Blocks P3 Shipping Alliance

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Fri. June 20th, 2014 - by Andrew McDaniel

CHINA - Arguing that it would ‘restrict competition,’ China surprised American and European business leaders on Wednesday by blocking the formation of P3 between Maersk, Mediterranian Shipping Co. and CMA CGM.


“The surprise here is that China has not approved this plan even after regulators in the U.S. and Eurpoean Union have given it the go-ahead,” said Lawrence Li, China Transportation Analyst at UOB Kay-Hain Investment Consulting in Shanghai. 


P3 was a plan that would have created a global alliance between the world’s three biggest shipping lines, allowing them to share vessels among common shipping lanes, according to Bloomberg.


“If there had been a Chinese partner in this I do think it could have gone through,” said Susan K. Ross, who heads up international trade at Mitchell Silberberg & Knupp in Los Angeles. “China wants a global position in a shipping just as in every industry.”


Maersk said it’s considering options on how to cut costs and address overcapacity in the freighter market after Chinese regulators unexpectedly blocked the formation of a global shipping alliance.


“We have different tools in our toolbox to activate,” Vincent Clerc, the Chief Trade and Marketing Officer at Maersk Line, told Bloomberg Television. “We have to look more at how we operate the fleet, at the speed of services.”


Maersk, the largest of these liners, saw its stock fall 5.3% Wednesday to a two year low in response to the surprising move.  Industry competitors also saw their share prices fall in the wake of the decision.  China Cosco Holdings fell by 1.3%, Nippon Yusen K.K. by 2% and Mitsui O.S.K. Lines by 1.6%, according to Bloomberg. 


On Thursday, however, Bloomberg reported that shares began to recoup some of their loses.  Maersk rose by 2.4%, China Cosco Holdings by 0.7%, Mippon Yusen K.K. by 1% and Mitsui O.S.K. Lines by 2.1%.


Despite the steep drop in stock prices, Maersk’s CEO Andersen remains optimistic about the company’s future earnings, saying “P3 would have been nice but it’s not a must have,” he said.  “Maersk is in a very strong position.  We are very competitive and making very good profits.”


Stay tuned to AndNowUKnow for more information as this story develops.