Maersk stock falls as China says no to mega shipping pact
China blocked the formation of a global alliance by the world's three biggest shipping lines in a surprise move that ignored western approval of the plan and sent AP Moeller-Maersk shares tumbling the most in two years.
The Ministry of Commerce said on its website that the proposed P3 vessel-pooling accord, which also included Mediterranean Shipping and CMA CGM, would "restrict competition" on the busiest Asia-Europe routes.
"The decision does come as a surprise to us," Maersk chief executive Nils Smedegaard Andersen said in a statement from the Copenhagen-based company announcing that the plan will now be scrapped. "The partners have worked hard to address all the regulators' concerns."
Maersk and its two allies said last June that they'd agreed to establish an operational pact with the aim of reducing costs on Asia-Europe, trans-Atlantic and trans-Pacific routes.
Container lines have been battling industry overcapacity after a boom in ship orders collided with the global financial crisis, triggering the worst slump in prices for the carriage of cargo since containerisation became global in the 1970s.
Shares of Maersk, the world's biggest container line, fell up to 8.7 per cent, the steepest intraday decline since May 16, 2012, and were trading around 6 per cent lower in Copenhagen. CMA CGM, based in Marseille, France, and MSC, which has its headquarters in Geneva, are both closely held.
The companies planned to commit 255 vessels deployed on 29 trade loops to a joint centre that would have run a combined fleet independently. Maersk, which transports about 15 per cent of all the world's containers, was slated to contribute 42 per cent of the total, including its Triple-E class of the largest-ever container ships with a capacity of 18,000 boxes.
China's rejection of P3 comes after the US Federal Maritime Commission approved the planned alliance in March and the European Commission closed its antitrust investigation earlier this month.
The Commerce Ministry said today that the P3 plan might have benefited Maersk, MSC and CMA CGM at the expense of other operators, and that in "numerous discussions" the applicants had failed to show that the positive benefits would outweigh any adverse impact.
The three companies - which had pitched the arrangement as operational, not commercial - control a combined 46.7 per cent market share, it said.
The P3 pact had initially aimed to commence operations during the current quarter, before Maersk said in May that the start date had slipped to the autumn amid regulatory scrutiny.