Global alliance flop after China spikes deal expected to hurt shippers

Beijing's rejection of a global shipping alliance to protect mainland companies navigating a choppy market will probably end up hurting cargo firms' earnings, including its own.

The Commerce Ministry's announcement spiking a deal between the world's top three container carriers - known as the P3 and led by Copenhagen-based AP Moeller-Maersk - may undermine recovery in an industry still feeling the 2008 financial crisis.

Overcapacity and low charter rates are likely to stay, jeopardising earnings, including at China Cosco Holdings and China Shipping Container Lines, the country's two biggest.

"This is less about the regulator trying to instil fair play in container shipping," said Jon Windham, Barclays Asia transport analyst. "It is a move to protect domestic players in China, vis-a-vis international players. The status quo in container shipping is not working."

China's rejection of P3 comes after the United States Federal Maritime Commission approved the alliance in March and the European Commission closed an antitrust probe this month.

The Ministry of Commerce said the P3 vessel-sharing alliance would "restrict competition" on the busiest Asia-Europe container routes.