China, Europe, US review planned container alliance

Maritime officials from China, the United States and the European Commission held their first joint meeting on Tuesday in Washington to review the proposed P3 Network, a pooling arrangement among the world's three largest operators of container vessels.

Denmark-based A.P. Moller-Maersk Group, Mediterranean Shipping Co SA of Switzerland and French carrier CMA CGM SA agreed in June to establish the long-term operational alliance on East-West routes to optimize resources and lower the cost of container shipping.

The alliance will operate total capacity of 2.6 million 20-foot equivalent units, initially using 252 large-capacity vessels on 28 loops on three trade lanes: Asia-Europe, trans-Pacific and trans-Atlantic.

Mario Cordero, chairman of the US Federal Maritime Commission, said the rapidly changing face of the global maritime sector demands "out-of-the-box" thinking and governments should share their views on global regulatory challenges and the impact on international trade.

While the P3 Network vessels will be operated independently by a joint vessel operating center, the three shipping companies will continue to have fully independent sales, marketing and customer service functions.

The network center and P3 Network intend to start operations in the second quarter of 2014, subject to obtaining the approval of relevant competition and regulatory authorities.

Luo Renjian, a researcher at the Institute of Transportation Research under China's National Development and Reform Commission, said unlike ship-sharing deals among smaller-sized shipping companies, the establishment of the P3 Network will encourage European carriers to grab more market share from Chinese companies.

"Battling overcapacity and fierce global competition, Chinese liners are struggling to make a profit. Meanwhile, the government has stopped offering subsidies for container vessels built in domestic shipyards," Luo said.

Global regulation was part of the agenda during the dialogue, along with network, ship-sharing and operational agreements for international trade.

The maritime commission provided a general briefing on the 45-day agreement review process and continuing monitoring program.

As all these companies are European-owned, the EC has expressed its support of the alliance and said the network will benefit shippers by improving service standards.

However, shipping companies in China and the US strongly oppose the proposal.

Since 90 percent of China's foreign trade is seaborne, and the country has developed a worldwide shipping industry, Chinese companies such as China Cosco Holding Co Ltd and China Ocean Shipping (Group) Co have urged the China Shipowners Association to raise concerns about the P3 Network and the impact on competition.

Li Hongyin, head of the Chinese delegation and deputy director-general of the bureau of water transport at the Ministry of Transport, said the sustainable growth of the maritime sector has great significance for China and global shipping markets.

The three parties have a common duty to protect the sound development of maritime transport, Li said.

The three shipping giants have a combined 37 percent of global capacity for container vessels, according to the Shanghai International Shipping Institute.