P3 rejection 'good for competition'

The Ministry of Commerce's rejection of a container shipping alliance proposal floated by three European maritime giants will maintain a fair competitive environment on a number of the world's busiest shipping routes, said industry sources.

A year ago, Denmark-based A.P. Moller-Maersk Group, Mediterranean Shipping Co SA of Switzerland and French shipper CMA CGM SA decided to establish a long-term operational alliance, the P3 Network, on East-West routes to optimize resources and lower costs. The ministry's decision essentially terminates the proposal.

Zhang Shouguo, vice-president of the China Shipowners' Association, said even though China's trade volume is the largest in the world, its container fleet is just fourth in the global market.

"Because Chinese shipping companies don't have the initiative when dealing with different clients throughout the world, they sustain a heavy service trade deficit, which the European companies don't need to confront," said Zhang.

Luo Renjian, a researcher at the Institute of Transportation Research under the National Development and Reform Commission, said unlike ship-sharing deals among smaller cargo carriers, 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 halted subsidies for container vessels built in domestic shipyards," Luo said.

The members of the proposed alliance have a total capacity of 2.6 million 20-foot equivalent units, with 255 large vessels on 29 loops on three trade lanes: Asia-Europe, trans-Pacific and trans-Atlantic.

Liu Bin, director of the Institute of World Economy at the Dalian Maritime University in Liaoning province, said competition will improve the development of the global shipping market.

"The P3 Network would be able to gather enormous resources, which could easily be used to monopolize the market eventually. The government's decision conforms to the trend of diversification and free trade in the international shipping market," Liu said.

Analysts also noted that China's container throughput capacity has been growing for several years, so the rejection of the P3 alliance will not only protect the interest of China's container operators, but also Chinese ports,

"With enhanced market power and global networks, powerful container shipping alliances such as the P3 Network may force ports in China to lower their service charge and cause long-term damage to profits," said Liu.