Jul.1--The P3 was a traditional vessel-sharing agreement, albeit a very large one, but for one distinct element that made it unprecedented in the annals of container shipping: its joint operations center. It was this unique element, an entity distinct from the member carriers with its own employees running a combined fleet of 255 ships, that played a key role in dooming the agreement at the hands of Chinese regulators.
In rejecting the P3 on June 17, the China Ministry of Commerce cited the joint operations center as pointing to “essential differences from traditional shipping alliances.”
A comparison of the the P3 Network with two other major alliances — the G6 and the CKYHE — released by Alphaliner showed not only market share differences, but this fundamental difference in the way the alliance was organized. An all-inclusive operations center based in London with authority over vessel schedules and operations made the P3 much more than just a vessel-sharing agreement in the eyes of the China Ministry of Commerce, or MOFCOM.
"The regulators' assessment of alliances' ability to exert market power could then rest on the absence of a coordinated operations center for both CKYHE and G6, which would work on a traditional alliance structure within a loose framework of coordinated slot sharing with individual carriers retaining control over the vessels they operate," Alphaliner said.
"In the case of the P3, the operations 'network center' was to have joint control over the P3 Network, including operational vessel management and scheduling, as well as the authority to withdraw and add sailings."
MOFCOM said such in its official statement, when it pinpointed each way the operations center would create a super-carrier system, rather than a run-of-the-mill alliance. The center manages operations and direct unused space sales, MOFCOM said. The three carriers had constructed a ship-pooling agreement, the statement read.
“Therefore, MOFCOM believes that a closely associated alliance will be formed in this case, with essential differences from traditional shipping alliances,” MOFCOM’s statement said.
Although the G6 Alliance has an office in Singapore, it is only used for coordination purposes and would lack independent decision-making authority. The P3 Network hub would have been the first of its kind. There were also plans for a Singapore branch for the P3.
After a year of planning and regulatory review in the U.S., Europe and China, the Chinese Ministry of Commerce on June 17 struck down the P3 Network’s plans to form an operational alliance. Network members Maersk Line, Mediterranean Shipping Co. and CMA CGM each issued statements saying the alliance would cease planning immediately.
The P3 Network from beginning to end
The G6 Alliance, which consists of APL, MOL, Hapag-Lloyd, Hyundai Merchant Marine, NYK Line and OOCL, and the CKYHE alliance of Cosco, “K” Line, Yang Ming, Hanjin and Evergreen, are both in different stages of regulatory approval. The G6 cleared hurdles earlier this month, while CKYHE is awaiting a decision from the U.S. Federal Maritime Commission, which is due by July 6.
Analysts saw the MOFCOM announcement as a way for the country to stick up for its state-owned carriers, with the P3 poised to take 47 percent of Asia-Europe capacity. Alphaliner said that capacity holding is still considered one of the main reasons MOFCOM decided to nix the alliance. CKYHE would hold 23 percent of that market, while G6 takes up an additional 20 percent.
A deeper look into the P3 shows that it could have affected the Chinese economy.
But in a world where there’s an unofficial 30 percent threshold when it comes to market share of an alliance on any one trade lane, CKYHE and G6 have surpassed that number on several occasions. In the trans-Atlantic, the G6 controls 38 percent of the market. In trans-Pacific, G6 controls 34 percent, while the CKYHE would take 32 percent, and the P3 Network would sit at 22 percent. U.S. and European regulators approved the P3 Network and the G6 Alliance.