Maersk says 2M will not require approval in China or Europe


MAERSK Line and Mediterranean Shipping Co will not have to obtain antitrust approval in either Europe or China for their planned 2M alliance, AP Moller-Maersk chief executive Nils Andersen said when announcing the group’s second quarter results. 
Only in the US will the pair need clearance from the Federal Maritime Commission before starting their vessel-sharing agreement covering the east-west trades. The US body conducts a 45-day review of any notified agreement, although can stop the clock while seeking further information. 

While the former P3 Network was scrapped after Chinese authorities declared it unlawful, the 2M alliance is a much simpler arrangement that will therefore be treated differently, said Mr Andersen during a conference call. 


In Europe, companies are required to self-assess to ensure there is no abuse of a dominant position, with Brussels basically in favour of shipping consortia that reduce operating costs. Although there has been some negative press in China about 2M, the country’s legal process covering such co-operative agreements appears to be similar to Europe’s. Brussels said it would not intervene in the case of P3, before China’s Ministry of Commerce issued an outright ban. 

However, even if 2M is treated differently, that does not preclude any subsequent investigation, should there be a complaint or suspicion of anti-competitive behaviour. 

Mr Andersen said that Chinese legislation did not appear to give scope for a veto, although he acknowledged there was no absolute guarantee that China would treat 2M favourably. 

Whereas Chinese regulators regarded P3 as a merger because of the intention of the three members to operate a joint fleet managed by an arm’s length central network centre, 2M will have a standard VSA structure. Maersk and MSC will keep their fleets separate. The alliance is expected to start early next year. 

Mr Andersen disclosed that 2M was not thought to be subject to approval in China when announcing better than expected second quarter results for Maersk Line, which again bucked the industry trend by producing bumper profits at a time when most global carriers are still struggling to break even. Hapag-Lloyd, for example, lost money in the second quarter. 

Surprisingly strong Asia-Europe volumes that were up 9% underpinned the results, said Mr Andersen. This is thought to reflect re-stocking in Europe, despite still weak economic conditions, with volume growth expected to slow in the months ahead once inventories have been replenished. Maersk has also seen a decline in backhaul cargo such as wastepaper and scrap shipments to Asia. 

Imports to the US were a little weaker than expected, said Mr Andersen, but are forecast to improve in the second half. 

Overall, global container demand was up by some 4% to 5% in the second quarter, with full year growth expected to be around the same level. Fleet capacity has expanded by 5% since the second quarter of 2013 and now stands at 17.9m teu, Maersk said. 


Volume increase 
The world’s largest containership operator posted a net operating profit of $547m in the April-June period, equivalent to a return on invested capital of 10.8%, and up from $439m or 8.5% a year earlier. That brought first half profits to $1bn against $643m in the opening six months of 2013. 

The ROIC was above the medium-term target of 8.5%. 

The line has now achieved seven consecutive quarters of earnings before interest and tax margins of five percentage points above the industry average. 

Revenue increased 3.8% to $6.9bn in the second quarter, lifting the six month turnover to $13.4bn. 

The strong performance reflected a volume increase of 6.6% to 4.8m teu and was achieved despite a 2.7% drop in revenue per 40 ft unit to $2,880 as freight rates remained under pressure. 

Unit costs were down by 4.4% to $2,585 per feu, with average bunker consumption per 40 ft box cut by 7.2% compared with the second quarter of 2013. 

Total bunker costs were down by 2.8% to $1.3bn in the second quarter as fuel consumption was reduced, despite Maersk Line and the other container brands in the group carrying more cargo. 

Scrapping of the P3 Network should have “no material impact” on the carrier’s anticipated 2014 results, the company said. 

Savings gains through 2M would mainly be achieved through lower bunker costs as larger ships are deployed. With more vessels in the network, individual voyages will be shorter because of the ability to operate more direct routes, so also reducing fuel consumption. 

Total savings will be a little smaller than P3 without the synergies of a joint fleet that was planned for the former alliance, but 2M will also be simpler to operate, Mr Andersen said. 

While 2M partner MSC appears to be embarking on a new fleet expansion programme, Maersk has ordered nothing since its 18,270 teu Triple-Es. Of that 20-strong order, 11 are still to be delivered this year and next. Maersk’s fleet at the end of June stood at 2.7m teu. 

Mr Andersen said Maersk Line had no immediate plans to resume ordering until all the Triple-E ships are delivered but kept a close watch on capacity needs. 

“We are constantly looking at our capacity needs,” he said. 

Although there is no urgent need to order, he indicated that market growth of 4% to 5% could signal a fresh round of newbuilding activity once all 20 Triple-E ships are in service.

The world’s largest container shipper, part of Denmark’s A.P. Moller-Maersk, and Swiss firm Mediterranean Shipping Co (MSC) reached an agreement on ship-sharing in July, a month after China’s Ministry of Commerce blocked a larger plan by the two firms and France’s CMA CGM due to competition concerns.
The global industry has been battling overcapacity since the financial crisis because new vessels ordered before the downturn have flooded the market. With freight rates still in the doldrums, the companies hope their new effort at pooling ships will help them reduce operating costs.
MSC
The container shipper gave notice of the new, so-called 2M vessel sharing agreement (VSA) to China’s Ministry of Transport in July, Maersk China’s Managing Director Jens Eskelund told reporters in a briefing in Shanghai on Wednesday.
Eskelund said that unlike the earlier plan, known as P3, the 2M service did not need approval from the commerce ministry. The two partners were only required to file details of the deal with the transport ministry.
The Ministry of Commerce had said earlier that they rejected the P3 alliance because the three firms would have had more than 40 percent of Asia-Europe and trans-Atlantic trade, crucial paths in the global trade of goods.
Director-general of the Commerce Ministry’s anti-monopoly bureau, Shang Ming, said in an interview with China’s state broadcaster last month that he was still worried the 2M alliance could erode the bargaining power of China’s import-export firms against big shipping companies.
Eskelund, though, said the market share to be held by Maersk Line and MSC on the Asia-Europe route would be similar to what other shipping alliances held. “Other alliances have been able to operate similar market shares to the ones that we will have on Asia-Europe,” Eskelund said.
Analysts said 2M would give the shippers less than 30 percent capacity share on the Asia-Europe shipping route.
Other alliances operating on the Asia-Europe route include G6 – made up of six shippers including Neptune Orient Lines Ltd and Nippon Yusen KK.
The CKYHE alliance – made up of shipping companies from China, Taiwan and South Korea – also operates on the route.

Maersk, MSC to Start 2M Alliance in January

Maersk Line, part of Denmark’s A.P. Moller-Maersk, and Swiss firm Mediterranean Shipping Co (MSC) are planning to launch their new vessel sharing service  as early as January 2015, with their customers being notified of the network and transit times by September, Reuters reports.


The world’s largest container shipper signed a 10 year Vessel Sharing Agreement with MSC (VSA) on the Asia-Europe, Transatlantic and Transpacific trades in July.
The VSA will be referred to as 2M, and it will replace all existing VSAs and slot purchase agreements that Maersk Line has in these trades.
The VSA will include 185 vessels with an estimated capacity of 2.1 million TEU, deployed on 21 strings.
The agreement was reached one month after China’s Ministry of Commerce refused to approve the P3 alliance which included the two firms and France’s CMA CGM.Maersk, MSC to Start 2M Alliance in January1
Competition concerns were stated as the reason for the blockade, saying that the three firms would cover more than 40 percent of Asia-Europe and trans-Atlantic trade.
The 2M VSA differs from the earlier proposed P3 alliance in two important aspects: the combined market share is much smaller, and this cooperation is a pure VSA. There will be no jointly owned independent entity with executional powers. It is projected that 2M would give the two companies less than 30 percent on the Asia-Europe route.
The financial crisis has left the global shipping industry battling overcapacity with vessels ordered prior to the financial dip overcrowding the market.
This pooling of resources is seen as a way of cutting down the costs.
World Maritime News Staff; August 21, 2014; Image: shipspotting

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