Thursday, October 9, 2014

US Authorities Agree to Container Freight Alliance - Or Do They?

2M Shipping Deal May Simply Happen as Deadline for Objections Draws Close
Shipping News Feature

US – WORLDWIDE – Although nothing official has appeared on its website at the time of writing it seems that the US Federal Maritime Commission (FMC) is minded to approve the 2M Alliance, the agreement to combine routes and services put together by the world’s two biggest container shipping lines Maersk and Mediterranean Shipping (MSC). If it goes ahead it is estimated that 2M will carry up to 35% of box freight between Asia and Europe plus around 37% of Trans-Atlantic trade and up to 15% of Trans-Pacific containerised cargo.

The proposed P3 Alliance, which included third largest box carrier CMA CGM, was shot down by Chinese regulators but sources in the 2M partnership have opined that, as a vessel sharing agreement, the deal will be rubber stamped by Chinese and European authorities and not require full formal approval as detailed here previously. That decision relies on the Chinese acceptance that the tonnages are below those which they deem acceptable for one organisation to transport.

Speaking to the Handy Shipping Guide today MSC says that it has only as yet seen other press reports based on an interview given by FMC Commissioner Lidinsky. In the interview the Commissioner stated that the FMC has decided not to issue a request for additional information (RFAI) which makes it seem likely that the FMC will issue no objection to the proposed Alliance, simply allowing the 45 day time limit which it had set for agreement to expire on the 11th October 2014.

With many smaller operators doubtless fearful of the influence which the two largest players in the industry will have on the market, plus the, at times erratic behaviour, of the legislators in different countries, it remains to be seen whether the 2M Alliance will remain on track to commence operations by early 2015.

Editor’s Note: Since this article was written the FMC has issued the following statement:

The Commission's decision, from which Commissioner Lidinsky dissents, will allow the Agreement to become effective, as scheduled on Saturday, October 11, 2014. The Commission’s decision is based on a determination that the agreement is not likely at this time, by a reduction in competition, to produce an unreasonable increase in transportation cost or an unreasonable reduction in transportation service under section 6(g) of the Shipping Act. The Commission’s action also imposes reporting requirements on the Agreement parties to assist the Commission in its ongoing, close monitoring of the agreement. FMC Chairman Cordero remarked:

"The Commission’s action on the 2M Agreement is based on the comprehensive, competitive analysis conducted by the FMC staff, and takes into account responses from the Agreement parties to staff and Commissioner questions raised during the 45-day review period, as well as comments received from the European Shippers Council, the only public comment received on the proposed Agreement. I am confident that the reporting requirements will ensure that the Commission will have timely and relevant information to monitor activity under the agreement, and will enable the FMC to act quickly should it be necessary.”

Maersk has also once again reiterated that the FMC’s decision was the only remaining jurisdiction where the VSA needed to obtain approval. Vincent Clerc, Chief Trade and Marketing Officer, Maersk Line, added:

"We are very pleased that the FMC has decided to allow our VSA with MSC to become effective. In our view, this is a win-win situation. Due to a larger and more cost efficient network, we can continue to provide our customers in North America, Europe and Asia competitive and reliable container shipping services. We look forward to starting operations on our new East/West network in January 2015.”