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From P3 to 2M: regulatory approval likely analysts say

From P3 to 2M: regulatory approval likely analysts say
The formation of the 2M agreement between MSC and Maersk answers some of the speculation since the collapse of the P3 alliance last month, but a fresh batch of questions have been created by the recent announcement.

"The 2M development doesn't come as a complete surprise and on the whole it looks like a strategically less aggressive alternative to the P3." Jonathan Roach, container market analyst at Braemar Seascope told Seatrade Global.

"Reviewing the number of vessels that Maersk Line and MSC are planning to deploy on the proposed 2M, vessel numbers will approximately 25 to 30% less than the original structure of P3 Network of CMA CGM, MSC and Maersk Line."

Given P3 fell at the hurdle of Chinese approval, all eyes will be on the Chinese authority's reactions to the latest agreement.

"In terms of regulatory approval, the 2M is European-based and to push this through the regulators in China could be just as challenging," said Roach.

Lars Jensen, ceo and partner at SeaIntel told Seatrade Global why he believes the vessel sharing agreement (VSA) will gain approval, " First of all they market share is lower and secondly, the Chinese were concerned that P3 - in their view - was essentially a merger. However, in the new agreement the lines clearly stress that people remain employed by the two different companies, vessel are operated independently and so on."

One way to ease the scrutiny of Chinese regulators would be to involve a Chinese line in any deal and Braemar's Roach did suggest a scenario for CMA CGM now that its P3 pals had eloped.

"One scenario that could be a possibility is that CMA CGM may wish to become operationally closer to UASC and CSCL, as this more global combination could be facilitated more easily in terms of approval in China."

Head of container research at Drewry, Neil Dekker, highlighted the choices CMA CGM will face, now that Maersk have committed to VSAs with MSC where it previously worked with CMA CGM.

“On Asia-Med services, CMA CGM and Maersk currently run four loops with combined ships on what is strategically a significant trade for CMA CGM. On those four loops it has 19 ships deployed ranging from 6,500 teu to 13,000 teu."

For Asia-Med and for Transpacific routes, Dekker suggested the line might run independent services or search for a VSA partner, although options are limited.

"One thing looks certain, and that is that the 2M is hardly a death blow for CMA CGM. The company has many 8,000 teu to 14,000 teu ships and benefits from the economies of scale and slot cost reduction that come with them. It also has a number of 9,000 teu ships on order and some of these are already earmarked for the Asia-Black Sea trade.

"The question is whether they operate in these trades alone and take on the pressure of filling all the slots single-handedly, or take on a slot sharing or vessel sharing agreement with another line or alliance."

One matter the analysts all agreed on was the continuing pressure on container lines to increase efficiency and reduce costs, and that consolidation through alliances and VSAs was a part of that process, which isn't without it's troubles.

Jensen restated his assertion that consolidation will be a gradual process, taking 10 - 15 years. Roach added that despite the pressures the industry faces, future co-operation was limited by the sheer number of lines already working together within the "top 20" carriers and that super-slowsteaming will play a major role in the future for container shipping.