Shippers welcome demise of vessel-pooling pact

Korean shipping companies are relieved that China torpedoed a P3 alliance proposed by the world’s top three marine shippers to help battle an oversupply in the industry and plummeting prices.

On Tuesday, the Chinese Ministry of Commerce vetoed the P3 vessel-pooling accord, which was proposed by the world’s three largest shippers - A.P. Moeller-Maersk of Denmark, CMA CGM of France and MSC of Switzerland - saying it would restrict competition.

The three companies account for 37 percent of global container capacity, according to shipping information provider Alphaliner.

The P3, first proposed last June, aims for stepped up cooperation to reduce costs on Asia-Europe routes as well as trans-Atlantic and trans-Pacific routes.

The alliance would have allowed the three companies to use 255 vessels. Chinese authorities claimed they would have controlled 47 percent of all cargo.

The P3 was expected to start later this year, but with China’s rejection, the three shippers have decided to give up on the plan.

Korean shipping companies said they were relieved.

“It’s certainly good news rather than bad news for us,” said a spokesman from a major local shipping company who asked not to be named.

However, analysts said the Korean companies still face fierce competition and the Big Three shippers will come up with alternate strategies.

“The cancellation of the P3 means the shipping market has entered a stage of complete, ruthless competition,” said Park Moo-hyun, a researcher at E*Trade Securities. “Now, aggressive investment in fuel efficiency will be the only way to survive.”

Hanjin Shipping has been part of the CKYHE Alliance and Hyundai Merchant Marine is part of the G6 Alliance.

However, since both are under debt-restructuring plans, they have been busy selling assets rather than making investments.

By joo kyung-don [kjoo@joongang.co.kr]