Wednesday, July 10, 2013

Shipboard Marriage

Formation of P3 ocean carrier group points towards increasing commoditization.

Imagine that FedEx, UPS and DHL announced that from now on, they are one big happy family, and you could call one number to get parcel service from all three of them. That is essentially what is happening in the world of ocean shipping.

The formation of the P3 Network, announced last week by the world's three largest ocean carriers (Maersk, MSC and CMA CGM), will result in the establishment of the largest maritime operational alliance, which will combine the three partners’ fleets on the Far East-Europe, Transpacific and Transatlantic trades. The three carriers will commit all vessels deployed on the three trades into a joint vessel operating center (JVOC) which is expected to begin operations in the second quarter of 2014.

It expects to initially operate 255 ships with a combined capacity of 2.6 Mteu, or 2.6 million twenty-foot-equivalent-unit containers, which will offer the widest network coverage on the three main east-west trades, encompassing 29 loops in total:
• Far East – Europe : 8 weekly strings to North Europe and 5 weekly strings to the Mediterranean;
• FE – North America : 6 weekly strings to the US West Coast and 4 weekly strings to the US East Coast (1 via Panama, 3 via Suez);
• Europe – North America : 4 weekly strings from North Europe and 2 weekly strings from the Mediterranean.

Maersk Line, the largest shipping line, will contribute 42% of the capacity, or about 1.1 Mteu, while MSC will contribute 34% or 0.9 Mteu and CMA CGM will contribute 24% or 0.6 Mteu. The strategy seems to reflect not strength but an attempt to deal with the overall weakness in the ocean container business, and increased efficiency should alleviate any tendency toward price increases, at least for now.

Ocean containers are increasingly commoditized with this move, with no competitive advantage other than price for the carriers to use to entice shippers. But the three shipping lines are still competitors, and whether the P3 alliance lasts remains to be seen. As the sign seen on many pleasure yachts points out, “marriages performed by the captain are only valid for the duration of the voyage.”

Kirk Shearer
TOTALogistix, Inc.
1-800-989-0054 x103

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