China's Bold Slap Down of the European Consortium

Op-Ed by Tony Munoz and Wendy Laursen

A protectionist “no” was the answer given by China’s Ministry of Commerce to P3 Alliance efforts to control about forty-seven percent of Asian-Euro container business. 

Maersk chief executive Nils Andersen said the Chinese decision came as a surprise. Really? Last year, China’s flag line, China Ocean Shipping Corporation lost $3.2 billion, and certainly China’s protectionist attitudes are not new. The country maintains strict cabotage laws which prohibit foreign flagged vessels from moving cargoes domestically.

In 2013, China was the number one exporter at $2.21 trillion and the number three importer at $1.95 trillion. Last year, its top seven ports handled approximately 117 million containers. China’s merchant marine consist of about 2,030 vessels, 206 container ships, and ranks number three in the world for ships owned. 

Although smaller alliances have been successful, a top 3 alliance raises questions about China’s ability to control its place in international shipping trade. The merger would have combined the world’s top three shipping lines Maersk, MSC and CMA CGM, giving them a potential competitive edge that would be hard to beat on Asia-Europe, trans-Atlantic and trans-Pacific routes.

Despite Asia’s growing urbanization and therefore demand for Chinese goods, these routes are of course pivotal to China’s global reach. In 2013, China’s top exporting partners were Hong Kong (17.4 percent), U.S. (16.7 percent), Japan (6.8 percent) and South Korea (4.1 percent). And top import partners were South Korea (17.4 percent), Japan (8.3 percent), Taiwan (8 percent), U.S. (7.8 percent), Australia (5 percent), and Germany (4.8 percent).

The two main existing alliances are G6, which includes Germany’s Hapag-Lloyd and five Asian carriers and CKYHE, which includes Cosco Container Lines. Andersen is quoted as saying that Chinese shipping lines don’t yet have the global route profile needed to have played a useful role in the alliance. Perhaps it is time to reconsider that position.