China denies vessel-sharing agreement

PC Network was developed to improve container shipping services.

June 18, 2014
Recycling Today Staff
Legislation & Regulations

The Chinese Ministry of Commerce (MOFCOM) has turned down a proposed long-term operational vessel sharing agreement that was proposed by three ship lines: Maersk, Mediterranean Shipping Co. (MSC) and CMA CGM. The MOFCOM’s decision was made following a review under the country’s merger control rules.

Under the initial proposal, the three ship lines had formed an organization called P3 Network that was designed to improve the service quality for shippers and well as provide what the three shipping lines say would be more frequent and reliable services.

P3 was introduced by the three ship lines on June 18, 2013, as a long-term operational vessel sharing agreement on the East-West trades.

Individually, the three container lines move a significant amount of the recyclables from the United States and Europe to the Asia, principally China. (Allen Clifford, executive vice president of MSC Mediterranean Shipping Company will be one of the speakers at the upcoming Paper and Plastics Recycling Conference & Trade Show.)

In a statement, P3 stressed that the agreement was an operational and not a commercial cooperation. The P3 partners also say that following the MOFCOM’s decision they have agreed to halt the preparatory work on the development of the network.

On March 24, 2014, the U.S. Federal Maritime Commission had decided to allow the P3 Network agreement to become effective in the United States. Last month, the European Commission decided not to open an antitrust investigation into P3 and closed its file.

“In Maersk Line we have worked hard to address the Chinese questions and concerns. 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. We are committed to continuing to be cost-competitive and offer reliable services,” says Vincent Clerc, Maersk’s chief trade and marketing officer.

“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. 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,” says Nils Andersen, Maersk CEO.

“We are disappointed by the decision of the MOFCOM but will continue our efforts to operate more efficiently and provide our clients with a comprehensive and excellent service,” says Diego Aponte, MSC’s vice president. “We could have achieved these efficiencies much faster through P3 but with our investment in more fuel efficient vessels, further economies of scale will still be achieved over a period of time.”

In commenting on the demise of the P3 Network, Chris Welsh, secretary general of the Global Shippers’ Forum, says, “The unprecedented size and scale that the proposed P3 Global Alliance was going to pose competition regulators was a concern to the GSF. We had welcomed the recent monitoring arrangements for the proposals, but the P3 appears to have failed the legal hurdles under Chinese competition law which we always recognized was likely to be both an unknown factor and problematic.”

In opposing the Network, the GSF had expressed concern that if the agreement was passed it could raise the potential for restrictions on competition cause by the commonality of costs resulting from the P3, including the potential risk of collusion on rates and capacity due to the wide-ranging scope of co-operation specified within the agreement.