Excerpt from Irish Exporters Association weekly ezine 

The Container shipping industry’s largest ever planned alliance stopped in its tracks.

China’s competition regulators have blocked the P3 Mega-Alliance planned between European owned container lines, Maersk, MSC, and CMA-CGM on the grounds that it infringes the country’s competition laws between Asia and Europe, particularly as the three lines have a combined market share of 46.7%. The unexpected decision, the alliance had already received approval from European and US Regulators, effectively inhibits the carriers’ ability to reduce costs by pooling assets and controlling over-capacity. It is, however, good news for their competitors and ports, despite not stopping the three companies from working together in other areas.

While the planned alliance cannot now operate out of Asia, because the US Federal Maritime commission and the European Commission have not blocked the alliance, the three carriers could now decide to implement joint services on the transatlantic route, as planned, even without the global P3 set-up. In global terms, though, the transatlantic business is small.

The P3 Network, as planned, would have involved 252 vessels with a total capacity of 2.6 million TEU’s (twenty foot equivalent units) on the Asia-Europe Trades alone. Maersk Line itself has already put into service eight “Triple E” class vessels, each with a capacity of more than 18,000 TEU, due for inclusion in the P3 network and has a further 12 similar newbuilds that will be delivered at a rate of one every six weeks until 2015. A train laden with that number of units would stretch from Dublin to Belfast and, while, even a year ago that size vessel would have appeared to be the largest that could operate the IMDO (Irish Maritime Development Office) is now quoting maritime consultant, “Seatrade Global” reporting that work on building a 24,000 TEU container ship, 5,000 TEU bigger than the current largest vessel, is set to begin construction in just two years time.  The larger vessel is expected to have “at sea” costs of 17.4% lower than those for a 16,000 TEU vessel.

The sudden step change in vessel size, first on the Asia-Europe routes, and then cascading down onto all other routes is already beginning to cause Port congestion issues as these vessels are limited in the number of Ports that can accommodate them, and there are inevitable delays in discharging and loading such vast numbers of containers. Lines are reporting significant schedule keeping difficulties.  Because there are worthwhile fuel savings in slow-steaming ,which can be passed on to customers in reduced fuel surcharges, lines are reluctant to speed up their vessels. The average vessel speed westbound from Asia is now 18.3 knots and Eastbound is 14 knots. In cheap oil days vessels were averaging 22 to 25 knots, drinking fuel but potentially saving inventory costs for customers.