Which ports are in the running to win and lose as the P3 unveils its service network?

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The new P3 network was unveiled today by the three largest box carriers, giving early indications of port winners and losers and suggesting a series of implications for freight service providers – the full 72-page document can be found here.

However, the footnote caveat on each page is the same: “the implementation of the P3 Network is subject to the approval of regulatory authorities”.

Subject to this approval, from the second quarter of 2014, Maersk Line, MSC and CMA CGM intend to commit 255 ships for a total capacity of 2.6 million slots on five east-west trade lanes, comprising 29 services.

For US trades, this equates to 27% of the market, while for Asia-Europe, it represents a dominant 46%; so for the time being, P3 deployment will be limited to squadrons of lawyers despatched to deal with competition authority discussions in the US, China and the European Union.

While in theory it is not a requirement that the European Commission’s competition directorate formally approves the operational alliance, the very nature of its size – it is estimated that P3 members will control 80% of ships of 14,000teu and over – will ensure that every detail of the grouping comes under the microscope.

Indeed, the Global Shippers Forum has already demanded that the EC investigate.

GSF secretary general Chris Welsh said: “Shippers are rightly worried about the potential of the P3 to eliminate effective competition in the world’s main liner trades. We therefore need an in-depth assessment of the P3.”

In the US and China the P3’s legal teams could face even closer scrutiny, as more formal approval is required, which will allocate separate time frames of 45 days for the first review, 45 days for consultation and a further 45 days for the final review, before a decision is reached.

So there are a number of hurdles to overcome before the P3 network actually goes live. It is possible, therefore, that newly appointed P3 CEO, Lars Mikael Jensen, may choose to delay recruitment of some of the estimated 200 staff required to run the London network centre and the Singapore satellite office.

Meanwhile, the jury is out on the potential fallout from the new alliance: one camp sees P3 having a stabilising effect on the container shipping market, while the opposite view argues that it will encourage more rate wars and volatility.

The rationale for the former is that while the three carriers must be competitive, they might be less likely to be quite so aggressive towards their vessel-sharing partners, preferring to save their cheaper unit cost firepower for other carriers and alliances. Moreover, judicious control of tonnage by the network centre will be able to turn the supply tap off and on, thus easing the overcapacity problem.

The alternative view was expressed by Alphaliner’s Tan Hua Joo at the TPM Asia conference this week. He argued that since the P3 players would offer the same service – given that they are loading on the same vessels and further commoditising the business – the only competitive tool at their disposal is freight rates, hence his prediction of greater volatility.

In some respects, the P3 members may prefer that this latter message is the one that gets through to shippers and competition authorities, as it could smooth its passage through the myriad of anti-trust objections that could be raised.

The other important implication concerns ports, and in particular the concentration of transhipment volumes. In Europe, the big loser appears to be Valencia, where MSC has traditionally had a large relay transhipment operation. That is set to be omitted from the P3 Asia-North Europe services with West Med transhipment taking place at Algeciras, Tangiers and, in one service, the Portuguese port of Sines.

In Asia, Singapore will serve as the transhipment hub on just one Asia-North Europe service, with Tanjung Pelepas preferred, while for Asia-Med and Black Sea services, Singapore is the main option. Similarly, Mediterranean transhipment locations vary according to the particular service, although clearly, it will take some time before the effect of the P3 schedules on port throughput is clarified.