The P3 alliance between Maersk Line, Mediterranean Shipping Company and CMA CGM will have a significant impact on ports worldwide, but who will win and who will lose?
The alliance partners aim to manage their east-west services as one fleet with a joint vessel operating centre, starting second quarter of 2014.
The major advantages for the partners seem to be related to ports, rather than in operating vessels per se. If P3 were to jointly manage exactly the same services as the partners currently operate with the existing fleet, it is hard to see significant gains in operational efficiency.
But on the port side, the partners can potentially reduce the number of terminal calls per port. This is especially true in ‘smaller’ ports (with a combined volume of the P3 partners of say 500,000-2m teu) where concentration on one terminal may lead to more efficient terminal operations and better deals with terminal operators.
However, doing this goes beyond operational decisions. Reducing the number of terminals per port has huge consequences for the associated terminal operators: APM Terminals, Terminal Link and TIL. Furthermore, such choices have important consequences for feeder and intermodal operations, both beyond the scope of P3 cooperation.
In addition, these choices will have major consequences for the remaining operations of the partners as all trades apart from the three East-West trades remain outside P3. In many ports the different trades intersect and the P3 operations cannot be seen in isolation. So, while there are potential benefits, realising these requires complex strategic decisions.
Second, the P3 alliance could re-design its network, and given the combined volumes, it appears likely that a network with more ports would improve service offerings to shippers. Whereas previously one carrier would have to reach a certain minimum threshold to make a direct call to a port attractive - say around 50,000-200,000 teu per year), the P3 alliance partners can now combine volumes.
Thus, one would expect a re-designed network of the P3 partners to consist of substantially more ports. However, this potential improvement of the service offering of the partners is a commercial, not an operational decision.
So while at first sight P3 seems to have a clearly defined scope for an operational partnership with the joint management of 255 ships on three trades, the major potential benefits of the P3 partnership seem hard to realise without addressing strategic and commercial issues. It would be a major achievement if the partners achieve this in the short period that remains if they are to be operational early next year.