The Federal Maritime Commission has released 83 pages of comments from shippers, ports, government officials and others about the proposal by Maersk, MSC and CMA CGM to create a global P3 Network
on the major East-West trade lanes.
The majority of the 54 letters from 53 companies were positive about the alliance, though over 30 appeared to be modified versions of the same form letter used by various companies and politicians to express support of the P3.
That form letter usually reads “I see the P3 as potentially positive for my company and the container shipping industry overall because it
- Enhanced ocean services including greater port coverage
- Increased overall stability in the market
- Service stability
- Consistent and competitive transit times
- Increased number of weekly sailings.
I support P3 as a positive step for the industry and my business.”
The letter also included a sentence for shippers to describe the type business they were in and number of containers they move, though some shippers did not bother with that, and the letter simply read, "As a shipper of (insert commodity) moving (insert number) FFE per year I certainly appreciate the opportunity to comment.”
Kathleen Yaskavich of Saramax Apparel Group in New York also said that she thought the P3 is potentially positive because it provides “more competitive pricing” a viewpoint shared by Mark Baker, the director of the South Florida Container Terminal, who foresees “more competition helping lower the cost of consumer goods."
Klaus H. Jepsen and Christian Mogelvang of the Hoboken, N.J.-based NVOCC Shipco said, “From all reports we have obtained, we believe that (by) creating this alliance, the shipping public in general, and the NVOCC field in particular, which is what we represent, would benefit from such collaboration amongst the carriers. It would solidify transit time, the overall on-time departure and arrivals, and make the carriers more responsive and cost effective — all of which, not necessarily by increasing rates. Further, it is our understanding that the three carriers who makes (sic) up the P3 will continue to conduct sales, marketing and customer services completely independent from one another, which will continue to ensure the individual approach and specificity that these carriers has (sic) developed over their many years in the business.
"It is therefore our recommendation that the Federal Maritime Commission grant P3 and the individual carriers approval to move ahead with this alliance.”
lan Baer, president of TTS Worldwide in Westbury, N.Y., said, “As an NVOCC holding contracts with nearly all of the top 15 to 20 carriers including the three proposed members of this alliance, we see little to no reason to prevent the alliance from commencing operation.
“Over the past 20+ years as an NVO, I have found that carriers act in their own self-interest first and then in the interest of the conference or alliance. This self-interest philosophy should protect the bulk of the shipping public from the danger of escalating pricing, shortage of equipment, and shortage of space. In fact, a streamlined approach to port calls, vessel rotation and relay hubs should lead to higher levels of schedule integrity, shorter transit times and increased box turns, all of which should help shipper’s supply chains reduce costs and provide the carriers with improved operating margins."
Baer continued, “Other alliances, including the Grand Alliance and the G6, have had little if any negative impact on the USA exporter or importer, and we would expect the same to continue when the P3 comes to life. From an FMC enforcement viewpoint, I think it is important that the commission ensure that customer pricing data remains confidential while allowing the three member lines to optimize their operational requirements. From our side, we give it a thumbs up!”
But other shippers expressed concern about the amount of concentration the P3 will create in the liner business.
Sara Mayes of the Fashion Accessories Shippers Association (FASA) wrote, “The sheer amount of market control afforded by such an agreement is extremely alarming to FASA and shippers in general. If ratified, the carriers would control 40-42 percent of vessels operating within the transatlantic routes, and 24 percent of those within the transpacific routes. Additionally, the fact that the carriers will operate through a single legal entity (Article 6, P3 Network Vessel Sharing Agreement), as opposed to previous collaborations between carriers, is alarming as well.”
Mayes said, “It is of great concern to FASA that such an agreement will trigger necessary civil action by the commission, as outlined in the legal standards within Section 6(g) of the Shipping Act of 1984, as amended by the Ocean Shipping Reform Act of 1998, (46 U.S.C. §41307(b)(1)).
“The market control present in the agreement may eventually lead to an unreasonable reduction in transportation service or an unreasonable increase in transportation cost. The former could occur if the P3 network, with massive market control, chooses to remove a trade lane or reduces capacity. At the same time, if the P3 Network chooses to place more capacity in a specific trade lane, other carriers may be driven out of business. A situation where other carriers are driven out of business could then result in the latter increase in transportation cost,” Mayes said.
"As an additional example," she continued, "according to the recently released May 2014 service schedule for the network, the P3 carriers plan to increase speeds, which will force other carriers to do the same in order to retain market share. This will drive up their costs, which will either result in higher rates or carrier default.”
Mayes’ concern about the fact that the P3 will be operated by a central Network Center based in London was also highlighted by both the National Industrial Transportation League and the Global Shippers' Forum.
Matt Caldwell, a commercial vice president at Intermodal Tank Transport, an NVOCC based in Houston that operates a fleet of roughly 4,500 isotanks, said, “From everything that I am hearing and seeing, the P3 alliance is taking the three largest shipping lines in the world and creating a monopolistic setting for shipping for Asia, Europe and the U.S.
“We do not feel that this is necessarily a good idea. From what I can tell, this will reduce vessel capacity and drive pricing up. This is neither good for my company (nor) our customers. In the end, this will raise shipping costs for all parties and will have to be passed on to the ultimate end users of all products globally. I have discussed this with many of my customers, and they also feel that this will not be beneficial to anyone in the long run except the three shipping lines that are associated with it.”
His concerns were shared by Beverly Altimore, executive director of the U.S. Shippers Association, whose membership includes eight large chemical companies, with FMC, Air Products & Chemicals and LyondellBasell Industries among them.
“The fear among shippers is that the negative consequences of the P3 Alliance will substantially offset any gain and will lead, in the near future, to shippers being caught in the P3 Carriers’ vise grip, resulting in sliding quality service, higher rates and fewer available liner choices,” she wrote.
“We believe that the P3 Alliance is a game-changer in the shipping industry. It will change the face of the industry, it will change the makeup of the industry, and it will change the carrier-shipper relationship. These three mighty carriers would not be even considering the alliance if the changes that it will bring about would be in any way detrimental to themselves. They are only proposing it because it will give them power and control over the competition and over the beneficial cargo owners that they do not now hold,” she wrote.
“We have always relied on the FMC to look out for the interests of the American shippers over the interests and profits of foreign ship owners, and we ask for that now,” wrote Altimore.
James White, executive director of the Port of Baltimore, saw the P3 “as potentially providing significant positive advantages for our port." While MSC has long been a major carrier in Baltimore, he said the P3 would result in the “introduction of two additional ocean carriers to a constrained market, which will increase competition and potential(ly) reduce ocean rates.”
James Newsome, the president and chief executive officer of the South Carolina State Ports Authority, suggested that the FMC “undertake a detailed study of the impact of increasing concentration in the carrier segment of the industry on ports. It is likely in the near future that three mega-alliances will control 90 percent of global container capacity.”
Andrew Abbott, the president and CEO of Atlantic Container Line, noted that while his company exchanges approximately 550 TEU in each direction across the Atlantic with Hapag-Lloyd, it does not belong to any consortium agreement.
“ACL is very concerned about the significant buying power granted to mega-constellations like P3 and other large consortia,” he wrote. “We believe that a consortium’s ability to negotiate and buy products and services as a bloc greatly distorts the market and makes it impossible for non-consortium carriers to compete with them.
“In granting carrier consolidations like P3 authority to operate as a bloc, you give this mega-consortium the upper hand in every trade lane, because independent carriers do not have the buying power of a large consortium. Furthermore, the rise of large consortia worldwide will eventually bring about the demise of the smaller ports, the smaller terminals, the smaller stevedores, the smaller truckers, and the smaller logistics suppliers of every type,” said Abbott. “With more and more cargo being handled by a few large consortia, they will use their volume to select those vendors who marginally price their products and services at the lowest levels, putting all smaller enterprises out of business.”
Abbott said, “If P3 is approved by the FMC, then you will force every remaining carrier to join forces in a similar bloc to be competitive. The single, independent carrier will go out of business. American exporters will no longer have a large portfolio of carriers to choose from. Instead, he will have only two or three big consortia to choose from, with service one or
two days per week instead of seven days per week as today. The smaller terminal operators, smaller truckers, smaller logistics vendors, and smaller ports will quickly disappear. American manufacturers will eventually pay the price as both choice and service deteriorates."
Abbott finished by saying, "We hope that the FMC will carefully review the overwhelming advantages of coordinated carrier groupings like P3 vis-a-vis the single operators.”