The three largest container shipping carriers in the world, Maersk Line, Mediterranean Shipping Co. and CMA CGM, said this morning they have agreed in principle to establish a long-term operational alliance on East–West trades, which they're calling the “P3 Network.”
The carriers said the P3 Network would initially operate 255 ships in 29 strings with 2.6 million TEUs of capacity on three trade lanes: Asia – Europe, transpacific and transatlantic.
While the P3 Network vessels will be operated independently via a joint vessel-operating center, the three lines will continue to have fully independent sales, marketing and customer service functions.
Vincent Clerc, chief trade and marketing officer for Maersk, said the alliance “will provide our customers on the main trades with attractive, stable services and our Triple-E vessels will be implemented in the network without adding to the overcapacity on Asia-Europe.
“Fuel consumption will also be reduced with significant benefits for the environment, and our operations will get even more efficient and competitive,” he said.
The three carriers hope to begin operation of the network in the second quarter of next year, subject to obtaining the approval of relevant competition and other regulatory authorities.
The three carriers have cooperated on some services before, but the alliance outlined today is much more extensive. They said it will “improve and optimize operations and service offerings.”
BlueWater Reporting estimates that Maersk, MSC, and CMA CGM currently allocate on their existing services:
• 149,905 TEUs weekly in the trade from Asia to North Europe and the Med, 45 percent of the total of 333,068 TEUs allocated by all carriers in the trade.
•67,559 TEUs weekly in the trade from Asia to North America, 18.2 percent of the 370,462 TEUs allocated by all carriers in the trade.
•39,669 TEUs weekly in the trade from North Europe and the Med to North America, 43.1 percent of the 92,067 TEUs allocated by all carriers in the trade.
Clerc said the carriers have already had some discussion about their plans in the works for six months with the U.S. Federal Maritime Commission as well as regulators in Europe and China.
He noted the three carriers already have extensive cooperation on services that touch the United States—either all three together or bilaterally.
On the transpacific, the three companies have cooperated on two stings for five years, and Maersk and CMA CGM have a service where they cooperate to the Pacific Northwest and the U.S. East Coast. MSC and CMA CGM have a joint service from South China to the Pacific Southwest.
MSC and CMA CGM also cooperate in the transatlantic and until a month ago had a cooperative service to the Mediterranean when Maersk restructured its U.S. to Med services.
Between the Asia and Europe, Maersk and CMA CGM cooperate on services between the Far East and Mediterranean and MSC and CMA CGM cooperate service between Asia and North Europe.
But Clerc said the announcement is a big extension of the existing cooperation, putting all three carriers under one governance. “It’s a pretty significant surgery on the network,” he said.
He said the weekly carrying capacity being offered by the three carriers will be about the same as today, though slightly more in the transpacific where they expect some growth, in the low single digits, next year. He said it will be marginally less, by 1 or 2 percent, on the Asia-Europe trade.
Neil Dekker, head of container research at the London-based consultants Drewry, said the initiative “must be considered as a welcome one for the industry since it will help reduce carrier costs and stabilize the market. There are still more than 15 competing carriers on most trade routes and the combination of Maersk/MSC/CMA CGM in an operating alliance will not damage competition. But, it will contribute to the trend towards lack of differentiation of services in container shipping which is something that will continue to worry shippers.
“On the positive side, the formation of a bigger alliance should make it easier to adjust capacity up or down as demand changes, instead of through large lumpy additions or deletions of whole loops," Dekker added. "Should the new initiative be fully approved by the regulatory authorities, this will mean 13 of the top 20 lines are in a structured alliance on the main East-West trades, leaving UASC, Evergreen, CSCL and Zim out on a limb.
"Potentially, it also solves the problem for Maersk of how to best deploy its remaining eight Triple Es - by presumably combining with CMA CGM's 16,000-TEU vessels," Dekker said.
“Vessel-sharing agreements such as this can be efficiency-enhancing,” said Peter Gatti of the National Industrial Transportation League, the nation’s largest shipper organization. “Hopefully some of that efficiency will be translated into results for their customers.”
Clerc said Maersk’s biggest ships, including the Emma Maersk
-class and the 18,000-TEU Mærsk Mc-Kinney Møller
and its sister “Triple E” ships, will be part of the cooperation. Mærsk Mc-Kinney Møller
, the world’s largest containership, was named in a ceremony at a Korean shipyard last week and is due to be delivered to Maersk later this month for the Asia-Europe trade.
CMA CGM said all of its large ships, including the 16,000-TEU CMA CGM Marco Polo
class vessels, will be deployed in the P3 network.
“The major impact for CMA CGM will be to be able to offer on the three key East West trades the best possible quality of service at the lower possible cost,” a spokesperson said.
“We are convinced that this new potential operational cooperation with Maersk and CMA CGM will provide significant efficiencies and a major improvement to our current service network,” said Diego Aponte, MSC’s vice president. “Increased services available, extended direct port coverage and more efficient vessel routing will enhance our service offering to our customers and also deliver significant environmental benefits through substantially lower fuel consumption compared with the lines operating independently and therefore much reduced CO2
emissions for the benefit all. Improvements to schedule reliability and reductions in port congestion are also expected.
“Everyone should see a benefit from this cooperation, including from an environmental standpoint even those people who are not customers of MSC or of the other lines. We confidently expect that the service and efficiency benefits from this operational alliance, which will connect with MSC’s comprehensive feeder network, will keep MSC in a strong competitive position for the foreseeable future,” he added.
Clerc said while Maersk had originally planned to operate the Triple E vessels on its own, the carrier has known for about six months that it would likely use them in joint service.
After comparing the two alternative, he said the company found it is more effective to use the ships jointly because it can use fewer ports, creating efficiencies.
The combined cargo of the three carriers on the “big trunk corridors of the trade represent a much larger share and you can just capture that cargo and let the other strings go to the other ports. It is not going to trigger a heavier reliance on feeders or transshipment,” he said.
But he added “there is no doubt that there has been no growth on the East-West markets which puts a lot of pressure on the lines to find a way to lower their cost base, and to lower your cost base you have to find synergies and economies of scale.”
He said that by combining, each line will be able to offer more weekly sailings in their combined network than they do individually. As an example, the P3 Network plans to offer eight weekly sailings between Asia and Northern Europe. In addition, the P3 Network will offer more direct ports of call.
Maersk also said the improved network is expected to reduce the disruptions for customers caused by cancelled sailings.
Maersk would contribute ships with 1.1 million TEUs, or 42 percent, of the P3 Alliance capacity; MSC about 900,000 TEUs, or 34 percent, of capacity; and CMA CGM about 600,000 TEUs, or 24 percent, of capacity.
Clerc said, as big ships come into the trades, the carriers will cascade 8,000- and 6,000-TEU ships to other trades where they are suitable and also take some ships off charter.
Why is it called the "P3 Alliance"?
“When we started six months ago, we called it P3 for 'project three,' and at some point we had to come up with a name for it, and we had grown so used to using that name for six months, and we had a hard time coming up with something else,” Clerc explained. - Chris Dupin