Embattled shipping operators form alliance

Three leading shipping companies announced an alliance on three crucial routes on Tuesday in a strategy to face over-capacity and declining demand for transportation. CMA CGM of France, Maersk Line of Denmark and Swiss MSC Mediterranean Shipping Company said that the new so-called P3 Network would initially use 255 ships on three trade lanes: Asia-Europe, Trans-Pacific and Trans-Atlantic. Anti-trust regulators are however certain to give the unprecedented alliance careful scrutiny as it puts the industry's biggest shippers in close cooperation with an overall capacity of 2.6 million standard-sized containers (TEU). Michael Foeth, an analyst at Vontobel said it was unclear whether such an alliance would carry over to pricing "and whether regulatory bodies would allow any coordinated behaviour" against competitors left outside the scheme. "Coordinated pricing would in my view not be tolerated by regulators given the high fragmentation of the market," Foeth warned. Anne-France Malrieu, a spokeswoman at CMA CGM said there would be "no effect on competition" with each company continuing to choose its own prices and strategy. "Declining volume growth and over-capacity in recent years have underlined the need to improve operations and efficiency in the industry," the companies said in a statement. In the scheme, each company will offer more shipping options to customers then they would individually "through better utilisation of vessel capacity," they added. The companies intend to begin the programme in the second quarter of 2014, but the go-ahead still requires regulatory approval as well as finalised contracts linking the companies. Maersk Line, a unit of A. P. Maersk, will contribute 42 percent of the joint shipping force. Italo-Swiss company MSC will pitch in 34 percent and France's CMA CGM 24 percent. With world growth still yet to fully recover from the 2008 financial crisis, shippers are faced with declining traffic, lower volume demand and surging capacity as jumbo-sized ships come on line.