Mærsk joins up with CMA CGM and MSC Mediterranean Shipping Company. JyllandsPosten has: EPN.DK
Mærsk Cooperation To Be Called P3-Network
The cooperation between Danish Maersk, French CMA CGM and Swiss MSC Mediterranean Shipping Company will be called the P3-network according to a press statement from A.P. Moller – Maersk A/S (OTCMKTS:AMKBY).
The combined fleet starts out with 255 containerships with a collective capacity of 2.6 mio. TEU on the major “East-West” markets: Asia-Europe, Asia-North America and North America-Europe. Maersk Line has about 42% of the capacity or 1.1 mio. Box Ships Inc (NYSE:TEU).
The coming 20 18.000 Box Ships Inc (NYSE:TEU) triple E ships will join the network. The first, Mærks McKinney Møller, is setting out on her maiden voyage.
The three shipping lines emphasises that they will keep their separate and sales-, service- and marketing-functions and is a counter move to the alliances made by competitors (primarily Asian) in the winter 2011-12 to manage capacity.
The three shipping lines are the largest in container sailing by far with a market share of about 37% and A.P. Moller – Maersk A/S (OTCMKTS:AMKBY)having over 15% of the world’s container fleet.
The network will have to await the authorisation of the authorities and other legal details; but hopes to finalise the contracts end of this year and start the actual sailing in Q2 2014.
Such large cooperations are inherently unstable as there will always be the temptation to cheat and secure the best slots each for themselves. The winner is generally the biggest of the three (or more) and the others take the leftovers. With .4 mio TEUs coming off the production line of the Daewoo the Maersk share will increase to about half – provided the others do nothing.
There is a vast overcapacity on the container market! Berlingske had: Business.DK
Since the last top of 1423 USD/TEU on Europe-Asia the rates dropped to 533 USD/TEU on Friday June 14th 2013 according to Shanghai Shipping Exchanges SCFI-index – or a reduction of 62.5%. shippingwatch.dk does however report the rates have stopped falling.
One thing is that China’s growth is slowing down (a polite expression for a collapse), but i’st more likely that this the opportunity the “P3” has been waiting for in order to kill off the small fry. The Mærsk McKinney Møller-class will be able to sail at a unit cost far below that of the competition. For quite some time container shipping has been a losing proposition – especially for the smaller ships. The capacity adjustments will hit the smaller lines and ships. This means that the corporations between the competitors starts out with whom is going to die first.
It has been predicted for quite some time that a major consolidation in container shipping was inevitable, simply because the Chinese growth is/was unsustainable and the unit transportation cost for the large ships is so much lower. The time for consolidation has probably come: It will not be death by strangulation of the small lines; but a question of breaking their necks. It could be very quick.
For once, legal delay will probably not be serious as with rates so low and capacity so large and growing, it will strain even the most protectionist governments’ patience and strength to subsidy non-competitive alternatives.
Neither should it be overlooked that capacity has been lowered for years by slow-steaming or even super-slow-steaming to an extent that probably has lowered transport capacity with about half. This capacity can be brought into play by the simple expedient of stop leaning on the throttle of engine – at very low cost. In some sense, half the world’s ships have been laid up at sea – just by sailing slower. This will eliminate the cost of laying up ships – and bringing them into service.
We are experiencing a predicted drop in volume and a growth in capacity (it should be noted that Mærsk originally contracted for 30 Mærsk McKinney Møller – class, but has since not taken the option on the last 10). Daewoo just might recalculate prices so the price could be still more attractive – it is unlikely the competition will take up the slack.
It is an old Mærsk tactic: Make the ships larger and limit the number of yards that can build them. Fill up the yards with orders so the competition can’t get anything delivered before it is too late, and A.P. Moller – Maersk A/S (OTCMKTS:AMKBY) has grabbed the market. When the crunch comes – as it will eventually – Mærsk is sailing with low cost pr. unit shipped, modern ships and the ability to improve service (shorter delivery times)—as the competition dies.
But that is only a small part of the story. JyllandsPosten had: epn.dk
Mærsk is considering increasing its share in the major Chinese port Ningbo to 1/3 from ¼. APM Terminals took share of the port in the middle of 2012 in a joint venture with Ningbo Port Group – the third largest Chinese container port.
Port_of_Ningbo calls Ningbo the second largest port in the world on tonnage after Shanghai, but that also covers that the further distribution on the Yangtze River.
Considering a lower total volume in trade with China it should cover Mærsk’s needs and the “considerations” just might be the price is not right at the moment – it will be! What will Ningbo be without Mærsk in the future? That is easy to answer: The will be no future for Ningbo without Mærsk.
One should note the piece the Chinese Ambassador had in Berlingske earlier this month: www.b.dk
Officially the talk will be on wind mills—but otherwise it is a follow up of president Hu Jintao’s visit last year.
Another thing that has been overlooked is that the old fashioned reefers might not have such a great future as refrigeration will be a question of plugging in the container. Nice thing for the shipping line, as if the freight spoils due to faults of the container it is not the shipping line that will have to reimburse the loss.
We now only need to cover the composition of the freight:
As China’s industry winds down it will not be the great volume of iron ore nor coal that will fill the Chinese ports: it will be grain ships from the USA carrying corn for fodder to the pigs of China.
Danes generally find it smarter to grow the grain, stuff it into pigs, kill the pigs and cut them into spare parts, package them for the market that pays best and send them in a container. A pig eats 3-4 times its own weight in grain (depending on husbandry) before being slaughtered and butchered. Did I mention the pork quotations are getting up alongside the price