1.

Press release: CMA CGM, Maersk Line and MSC to establish an

operational alliance
Tuesday, June 18, 2013

CMA CGM, Maersk Line and MSC Mediterranean Shipping Company SA have agreed to
establish a long-term operational alliance on East – West trades, called the P3 Network. The
aim is to improve and optimize operations and service offerings.

The P3 Network will operate a capacity of 2.6 million TEU (initially 255 vessels on 29 loops)
on three trade lanes: Asia – Europe, Trans-Pacific and Trans-Atlantic.

While the P3 Network vessels will be operated independently by a joint vessel operating
center, the three lines will continue to have fully independent sales, marketing and customer
service functions.
Improving services for the customers

The P3 Network will provide customers with more stable, frequent and flexible services.

Each of the lines will offer more weekly sailings in their combined Network than they do
individually. As an example, the P3 Network plans to offer 8 weekly sailings between Asia
and Northern Europe. In addition the P3 Network will offer more direct ports of call.

The improved P3 Network is expected to reduce the disruptions for customers caused by
cancelled sailings.

In order to provide customers with a consistent service offering across the Network, the lines
will establish an independent joint vessel operating center.

Need for efficiency

Declining volume growth and over-capacity in recent years have underlined the need to
improve operations and efficiency in the industry. This has prompted the creation of other
operational alliances such as G6 and CKYH. Using the P3 Network the lines expect to be able
to improve their efficiency through better utilization of vessel capacity.
Subject to approval

The lines intend to start operations in the 2nd quarter of 2014, but the starting date will be
subject to obtaining the approval of relevant competition and other regulatory authorities.

In addition, the establishment of the P3 Network is subject to the lines agreeing on definitive
contracts. Finalization and signing of the contracts is planned for the 4th quarter of this year.
The P3 Network will based on existing capacities of each member, initially operate a capacity
of 2.6 million TEU (255 vessels)
Maersk Line will contribute with approximately 42% of the capacity, of about 1.1 million
TEU.
MSC will contribute with approximately 34% of the capacity, of about 0.9 million TEU.
CMA CGM will contribute with approximately 24% of the capacity, of about 0.6 million
TEU of capacity.
Vessels contributed to the P3 Network will continue to be owned and/or chartered by the
lines.
Vincent Clerc, Chief Trade and Marketing Officer, Maersk Line
Diego Aponte, Vice President, MSC Mediterranean Shipping Company SA
Rodolphe Saadé, Executive Officer, CMA CGM

2. P3 Roils the Waters

Journal of Commerce

July 5, 2013 Friday 12:30 PM GMT

BYLINE: Peter Tirschwell

As the container shipping market sizes up the impact of the P3 alliance among Maersk Line,
Mediterranean Shipping and CMA CGM, some key themes are emerging: Don't expect
a reduction in capacity, don't expect any less competition, expect more commoditization of
service and, perhaps along with that, an increasing trend toward the spot market and hedging.

Nowhere in the picture is the idea that the P3 will stabilize rates or create upward pressure on
rates, or that any other carriers are likely to drop out. "None of (the P3's) main competitors are
expected to make an exit" from the three main east-west trades, Alphaliner said. The market
will remain just as competitive and volatile as it is now. And, in a potentially worrying sign
for carriers, the efficiencies the P3 gains will lead to sizable differences in vessel operating
costs among the major alliances. This could lead to more orders for lower cost mega-ships as
other alliances try to catch up.

In a release titled "G6 and CKYH need ULCV shopping spree," SeaIntel Maritime Analysis
bluntly stated the operating cost issue: When it's launched in the second quarter of next year,
the P3 will have significant operating cost advantages. By the time the P3 takes effect, the
average vessel size in the alliance's 255 ships will be 25 percent larger than ships in the
CKYH alliance and 12.5 percent larger than ships in the G6, SeaIntel said.

It added that once all the currently ordered ultra-large container vessels are delivered by the
end of 2015, the P3's advantage will have increased to 22 percent compared to the average
vessel size of the G6 and will still be 23.5 percent larger than CKYH.

"The CKYH and G6 alliances need to make a choice in the near future, as to whether they
want to be severe unit cost challengers to the P3 alliance in Asia-Europe trade or not? If they
want to challenge P3, they need to place orders for new ULCVs within the next year, or
otherwise the P3 alliance will have a significant scale advantage for a long period of time,"
SeaIntel said.

Thus, the P3 and the position it puts the other alliances in muddies the industry's outlook for
the next few years. The industry is looking at slower growth over the long term. Initially, that
was the result of a petering out of the outsourcing wave of the 1990s and 2000s. There are
now other factors to consider, including a structural deceleration of growth in China, long-
term malaise in Europe and slowing growth globally.
It may not matter as much, as carriers in recent years had been hoping, that the pace of
container ship ordering has slowed or that financing from traditional sources such as German
KGs and European banks has largely dried up. That story may no longer have legs. Financing
can be found if carriers want to build ships, as the recent 18,000-TEU ship orders by China
Shipping and United Arab Shipping show, and shipyards have the capacity to crank out more
mega-ships if asked. If carriers are coordinating orders with alliance partners in order to fill
out planned vessel strings, their individual financing burden and overall risk is lessened.

And this will fold into the pricing picture. To the extent carriers were able to offer
differentiated services in the past, the formation of the G6 and P3 makes that a harder
proposition now. Schedule reliability, a key differentiator of service, will even out now that
carriers are aligning for the long term. Daily Maersk sailings will be available to its partner
carriers. The P3, Alphaliner said, will "result in further commoditization of the services
offered, as the coverage and transit times of the three carriers will be largely harmonized."

If service is being commoditized, does this mean the spot market, including hedging
instruments that have struggled to take off, gets a needed boost? Derivatives traders say
interest from carriers, which initially were disdainful of the forward market for container
slots, has picked up and that some are even complaining that liquidity in the forward market
isn't large enough for them to hedge a meaningful portion of their book of business.

As I argued in my last column, the P3 would not have formed were it not for the dire state of
the industry, yet it's unclear how the economics of being in container shipping change for the
better as a result. What remains absent from the industry is price discipline or aggressive
action to withdraw capacity. Until that happens, it will, for better or worse depending on your
perspective, be more of the same.

3. P3 Carriers Unveil Plans as Regulators Voice Concerns

BYLINE: Mark Szakonyi

Journal of Commerce

October 29, 2013 Tuesday 4:26 PM GMT

http://www.joc.com/sites/default/files/field_feature_image/coverart1.png

As shippers obtain more information about how the P3 Network would operate, regulators are
pressing the three member carriers to explain how the alliance will affect schedule reliability
and competition.

The world's top three container lines - Maersk Line, Mediterranean Shipping Co. and
CMA CGM - last week released details of their unprecedented proposed P3 alliance,
including ports of call and 28 service rotations.

The P3 goes well beyond past vessel-sharing agreements in the quantity of capacity it will
control, the number of service strings it will operate, and in the fact it will be operated not by
the three carriers collaboratively as in existing alliances, but by a unified operations entity.
Former Maersk executive Lars Michael Jensen will head a staff reportedly of up to 200 in a
separate legal entity operating out of London and Singapore.

The carriers revealed that the P3 Network would operate 28 loops using 252 vessels that
collectively represent 15.1 percent of the global fleet, or 2.6 million 20-foot-equivalent units.
The services would expand each carrier's current port call footprint, but will make it harder to
differentiate their service.

The proposed alliance will enable the trio to reduce operating costs in the Asia-Europe, trans-
Pacific and trans-Atlantic trades by consolidating their services around fewer but larger ships
that will result in lower per container costs and thus put the carriers at an advantage over lines
operating smaller ships.

The number of vessels the three carriers would operate on the east-west trades would decline
from 346 currently, according to the Federal Maritime Commission, but the carriers' overall
capacity would not shrink.

By allowing the carriers to reduce operating costs, the P3 would enable the carriers to
withstand chronically challenging market conditions. Global container capacity has expanded
by 38.6 percent since 2008 to roughly 17.6 million 20-foot-equivalent units, according to
Alphaliner. But volume has only risen 2 to 3 percent annually, Stephen Schueler, Maersk Line
chief commercial officer, told the JOC's 7th TPM Asia Conference in Shenzhen, China,
this month. The spot rate from Shanghai to the U.S. West Coast, for example, was down 30.7
percent year-over-year in the week of Oct. 18, according to the Shanghai Containerized
Freight Index.

Although the P3 is strictly an operating alliance and Maersk, MSC and CMA CGM are
known to be intense competitors, the proposed alliance has still raised concerns among
shippers and regulators as to possible market impact despite only growing volatility in
container spot rates.

Federal Maritime Commission Chairman Mario Cordero on Oct. 22 issued a rare public
invitation to fellow regulators in China and the European Union to participate in a summit in
Washington specifically focused on the P3. The FMC said its concerns stemmed in part from
the market share the alliance would control on the three east-west trades: 42 percent in Asia-
Europe, 40 to 42 percent in the trans-Atlantic and 24 percent in the trans-Pacific.

In a swipe at the proposed alliance, FMC Commissioner Richard A. Lidinsky Jr. said, "It is
clear this alliance is moving forward as if it has already met regulatory approval despite the
lack of any significant filing with regulatory authorities in Europe, China or the U.S." Zhang
Ye, president of the Shanghai Shipping Exchange, told the JOC's TPM Asia Conference in
Shenzhen on Oct. 17 that no filings have so far been made with Chinese regulators.

"The question on every shipper's mind is 'what will be the impact on my rates and the quality
of services,'" said Chris Walsh, secretary general of the Global Shippers' Forum.

At TPM Asia, Erik Fransson, logistics manager for the Swedish forest product company
Ekman, also expressed skepticism that the alliance would be entirely operational.
The Global Shippers Forum asked the European Commission to investigate the impact the
alliance would have on pricing and service. The National Industrial Transportation League, a
North American shipper group, wants the Federal Maritime Commission to launch a similar
inquiry.

The idea the carriers would use the alliance to collude on rates seems far-fetched to some. The
carriers "wouldn't be so stupid" to use the P3 to engage in uncompetitive behavior given the
steady glare of European antitrust authorities on the industry, said Alan Murphy, chief
operating officer and partner at SeaIntel Maritime Analysis.

Tan Hua Joo, Alphaliner executive consultant, told TPM Asia the alliance will result in more,
not less, competition among the carriers. "I think the P3 is going to drive further aggressive
behavior from the P3 carriers, as well as from their competitors," he said.

The G6 Alliance - including APL, Hapag-Lloyd, Hyundai Merchant Marine, MOL, NYK
Line and OOCL - didn't stabilize rates after being created two years ago, and there is no
reason to believe the P3 Network will fare any better, Tan said.

Instead, container rates will become even more volatile over the next 12 months, Tan
predicted, as the P3 members ramp up pricing pressure and 1.9 million TEUs of capacity
enters the waters during the next 15 months.

With little chance of industry consolidation, the capacity overhang will plague the industry
until at least 2016. In the short term, the situation means carriers will have a hard time
achieving rate increases in 2014 service contracts, and it's unlikely they will be able to
maintain a November general rate increase of about $1,000 per TEU.

"I think (the GRI push) will fail in the same way it failed last year," Tan said.

The other concern among shippers is how schedule reliability will be affected by the P3,
considering Maersk tops the market on reliability, with CMA CGM following and MSC
behind them, according to the SeaIntel Global Liner Performance database. But the trends
seem to favor improving reliability. CMA CGM and MSC, along with the rest of the industry,
have improved their on-time reliability between September and October, according to
SeaIntel data.

CMA CGM has been neck-and-neck with Maersk on reliability in the Asia to Mediterranean
trade lane since the beginning of the year, Murphy said, quoting the SeaIntel Global Liner
Performance database. MSC has beat the industry average on the same lane since May.

A CMA CGM release notes the network will create a new benchmark of service quality by
committing to 100 percent schedule reliability, a goal the Daily Maersk aims for. As an
independent entity, P3 will be relied on by the three carriers to deliver on service
performance.

"P3 will have to deliver on service," Schueler said.

CMA CGM in its P3 schedule release said its east-west services would provide improved
frequency through more weekly loops, daily departures and more direct port pairs each week.
The Marseilles-based carrier also said the network would offer wider geographical coverage,
such as direct calls to Japan in Asia-North Europe and trans-Pacific trades, and direct calls to
Scandinavia and Poland in the Asia-North Europe trade.

In addition to greater reach, Maersk said on its Web site that the stability of the P3 network
would reduce cancellations, an increasing form of frustration for shippers. The ability for
alliance carriers to move containers directly from one port to another doesn't necessarily
equate to better service, SeaIntel notes. But the number of port-to-port combinations available
to alliance carriers would reduce the risk of delays because transport would depend on one
service, i.e. the P3, not two or three independent services, SeaIntel said in its weekly Sunday
Spotlight newsletter.

The P3 network would offer 143 port-to-port combinations in the Asia-North Europe market,
giving it 80 more than the G6 carriers and 87 more than CKYH, according to SeaIntel. In the
Asia-Mediterranean trade lane, the P3 network would have 172 combinations, or 122 more
than G6 carriers and 83 more than CKYH.

One issue raised by the P3 proposal is the overall impact it could have on capacity. The ships
operated by the P3 are larger on average than those operated by the G6 or CKYH alliances. In
order to achieve cost parity or get closer to it, carriers in the G6 and CKYK, as well as carriers
not affiliated with a major alliance, could be spurred to invest in mega-ship tonnage.

"The reaction could very well be the CKYH and G6 carriers start a renewed program of
ordering of mega-vessels, despite the detrimental effect this would have on the long-term
market outlook," Murphy said.

For example, in the second half of 2014, the average P3 vessel on the Asia-Europe trade lane,
at 12,675 20-foot-equivalent capacity, will be 12 percent larger than the average G6 vessel
and 27 percent bigger than the average CKYH ship, according to SeaIntel. A year later, based
on current ship orders including the Maersk 18,000-TEU Triple E ships, the average P3
vessel, at 14,125 TEUs, will be 21 percent larger than the average G6 vessel and have 24
percent more capacity than the average CKYH ship.

A sense of which ports will benefit from the P3 network and which ports will lose is also
beginning to emerge as sailing schedules are released. Not yet released is the specific
terminals at which the ships would call. Still, the ports chosen by the P3 are a proxy for which
ports are "big ship ready," to use an advertising phrase.

Among European ports, Antwerp is clearly a winner, as the inland Belgian gateway will get
an extra call on the alliance's Asia-Europe service. The increased number of calls is
"extremely positive" for Antwerp's competitive position in the European port range, said Eddy
Bruyninckx, CEO of the Antwerp Port Authority.

Rotterdam, Europe's largest container port, will lose three export calls and two import calls, or
more than half its current Europe-Asia calls, according to Alphaliner. Hamburg loses one
import call while Bremerhaven's extra export call is outweighed by the loss of two import
calls. Zeebrugge loses one export call and one import call, while Le Havre gains one export
call, but this is neutralized by the loss of an import call.

Germany's upstart Wilhelmshaven is the clear winner, as the JadeWeserPort container

terminal on the North Sea operated by Eurogate, which has been virtually empty since
opening just over a year ago, will see two weekly P3 services. Other winners are Gothenburg,
Aarhus and Gdansk, which will represent new calls for two P3 carriers and Southampton and
Dunkirk, which will be new destination for one of the carriers.

In the U.S., it's little surprise that the ports of Los Angeles-Long Beach, New York-New
Jersey and Savannah are poised to benefit, considering their dominant positions in their
respective regions. On the West Coast, the port complex of Los Angeles and Long Beach, by
far the largest U.S. gateway, will see calls by all five weekly services from Asia, giving the
two ports direct calls from 19 different Asian ports. One of the five loops, the Sunrise service,
will call at Dutch Harbor, Alaska, to pick up seafood.

On the East Coast, the ports of New York-New Jersey and Savannah will see calls by three of
the four weekly all-water services from Asia calling at East Coast ports, giving both ports
direct services to and from 10 different Asian ports. These three loops will deploy vessels
with 8,500 20-foot-equivalent units of capacity from Asia to the U.S. East Coast ports via the
Suez Canal.

In Asia, Port Klang is the biggest loser, according to Alphaliner. The Malaysian port will keep
two westbound calls but will lose two of its three eastbound calls. Singapore will also take a
hit as the number of its weekly calls to North Europe will fall from three to one. The Port of
Tanjung Pelepas emerges as a clear winner in Asia. The Malaysian port's place on seven of
the eight westbound services to Europe will remain unchanged.

Those ports that are part of P3 loops stand to gain more than just volume. They will see faster
turnaround times because a single entity will arrange arrival times, instead of three, said Steen
Knudsen, chief operations officer for APM Terminals' Asia-Pacific region. P3 members will
focus their calls on mature terminals, not new operators, the executive at Maersk's port
operating arm said.

"Three of the largest players all of a sudden have a common and similar view of schedule
reliability, which will help us to deliver a more solid product," Knudsen said.

Senior Editor Peter Leach, Asia Editor Annie Zhu and Special Correspondent Bruce Barnard
contributed to this report.

4. Shipping industry not out of danger yet: Analyst

Published: Monday, 30 Sep 2013 | 5:21 AM ET

'Too much tonnage for not enough trade' in shipping: Expert

Monday, 30 Sep 2013 | 3:30 AM ET

Richard Meade, deputy editor of Lloyd's List, says that the eventual increase in demand will
reduce over capacity in shipping industry.

Despite hopes that global trade levels are recovering, it could take some time for the shipping
industry's chronic overcapacity to improve, an industry expert warned.
 The shipping industry has been through rough waters during the economic crisis, with a
decline in global demand resulting in a substantial capacity glut – especially on the Asia-
Europe route. This hit the shipping lines' revenue hard: the Baltic Dry Index (BDI) -- which
tracks day freight rates for dry bulk shippers – fell to a 26-year low in 2012.

However, this year has seen signs of a recovery on the back of global economies returning
slowly to growth, rising consumer confidence and a rebound in Chinese commodity demand.
As such, the BDI has risen almost 200 percent this year.

Richard Meade, editor of the maritime industry newspaper Lloyd's List, told CNBC that a
return to the supply-demand balance in the global shipping industry would be a slow process,
however, warning that there were still "unknowns" facing the industry.

"There is general consensus in the market now that we have reached the bottom -- if you look
at asset values in terms of the ships we're at record lows here – and I think people are going to
be looking to consolidate, find operational efficiencies and move into the up cycle," Meade
told CNBC Europe's "Squawk Box" on Monday.

"[However] the shipping market generally is besieged by overcapacity and the container
market, in particular, is still trying to churn out the ships that it ordered two or three years
ago."

Despite Meade's concerns, the shipping industry appears ebullient. On the back of rising
economic optimism – as growth returns to the euro zone in particular -- the world's largest
shipping group Moller Maersk, which carries 15 percent of all seaborne containers, called the
bottom of the global trade cycle last week.

Speaking to investors and analysts in Copenhagen last Thursday, the company's chief
financial officer, Jakob Stausholm, predicted that the world would emerge from the downturn
in the next two years and that the demand for global containers would grow by 4 to 6 per cent
in 2014 and 2015, up from recent forecasts of 2-3 per cent for this year.

Shipping companies like Moeller Maersk were affected during the downturn as they had
ordered new container ships when the industry was booming.

Meade said the industry was seeing the "last remnants" of over-ordering "but we're still in a
situation where there's still too much tonnage for not enough trade."

As such, indications that freight rates were going up, as seen on the Baltic Dry Index, could
be misleading, he said. "The BDI is indicative of the dry bulk market not the containerized
market…Shipping generally is very much a case of a lot of different sectors and a lot of
different market fundamentals here so dry bulk market going up is indicative of certain trends
going up but not of the whole industry."

Some shipping companies have reduced speeds -- and thereby fuel consumption -- to cope
with the drop in freight rates over the last few years. But as demand picks up, Meade fears the
industry could see container ships speed up , "flooding" capacity back in to the industry.

Concerns over freight rates or a shaky demand picture do not seem to have perturbed Maersk,
however, which launched the world's biggest container ship on Friday.
Named the Maersk McKinney Moller, the ship consumes 35 percent less fuel and has 16
percent more capacity than the company's previously largest vessel and is part of its Asia-
Europe route. The container ship can carry the equivalent of up to 180 million iPads or 111
million pairs of shoes in a single journey from Shanghai to Rotterdam.

The ship signals an attempt by Maersk to increase efficiency and comes as the company is
attempting to increase its profitability by forging an operational alliance two of its two biggest
rivals, Mediterranean Shipping Company and CMA CGM, on a number of sea routes.

Calling the alliance a "pretty clever" plan, Meade said it reflected hopes in the industry that
increasing demand would solve the problem of overcapacity. "I don't think anyone's
pretending that the container industry is earning great rates at the moment. This is really an
operation to try and reduce the volatility in the market."

5. BIMCO SHIPPING MARKET OVERVIEW & OUTLOOK – August

2013 – Container Shipping
Posted on August 20, 2013 by admin

Container Shipping
The balancing act continues, as demand moves forward at snail’s pace while a new record-
sized containership is deployed in the Asia-Europe trading lane

Demand:

The container shipping segment is in a class of its own. Demand is hobbling forward at best
while new and larger sized tonnage is introduced constantly and at the same time, idle
tonnage is reactivated. What do you get? That one is straight forward: poor utilization
numbers. But what do you also get in the market place these days? That is less straight
forward, as you get freight rates on main lane trades that provides a profit for the operators.
How can that be? Shouldn’t the markets suffer from constant downward pressure originating
from a heavily skewed fundamental imbalance? Well yes – but there is much more to it than
that.

Having said that, several container lines keep on posting poor financial results as the world of
container shipping is so much more than the main trade lanes. Demand is still fairly good in
the intra-Asian trades despite the lower growth level of Chinese exports and a recent
beggarthy-neighbour currency policy in Japan. On the trans-Pacific trades, volumes grew at
slightly more than 2% in both directions for the first five months of 2013, according to CTS.
Also, the volume growth on the backhaul leg from Europe to Asia was in positive waters.
Altering a sour start to the year, the trade has now delivered a cumulative growth rate of 2.7%
for the first four months. That leaves the blame on the Asia-Europe front haul leg, which
delivered a three-year low level of hauled containers for the first four months of 2013, down
1% on 2012.
Contrary to the norm, the freight rates on the Asia-Europe trade lane aren’t driven by making
supply match demand all the time. Actually, that correlation is quite far off if you compare
SCFI Europe freight rates to the “long-term” monthly year-on-year volume growth (red line).
A better correlation is achieved by using the “short-term” volume growth rate that compares
two successive months. Having said that, deployed capacity is constantly changed in search of
a balance – but as demand growth is so weak, it’s easy to get it “wrong”, with dramatic
consequences to follow.

As an up-front example of this, by the end of June, freight rates returned to safely profitable
territory following the largest weekly gain on record, going from USD 514 per TEU to USD
1,409 per TEU.

Supply:

Reversing the trend of several months with a falling level of idled containerships, mid-July
numbers from Alphaliner now indicate that 187 units for 448,000 TEU is currently idle. This
represents 2.7% of the total fleet. The dip in June was a 20-months low for the idle fleet. It
remains sub-5,000 TEU, tonnage which primarily is held idle.
The growth in the containership segments remains positively impacted by a healthy level of
demolition to counterbalance the inflow of newbuild tonnage. During the past two months, the
fleet has grown by just 5 ships. Year-to-date the fleet has increased by 3.8%, as 134 new ships
have been launched while 115 ships have left the fleet for good.

As the crisis bites into the economic value of the assets, the containerships that are being sold
for recycling tend to grow bigger in size. Back in 2011, the average size of 59 ships being
demolished stood at 1,308 TEU; in 2012 the average size grew to 1,865 for the 179 ships
bound to be broken up. 2013 continues down that road, with year-to-date demolition of 41
post-3,000 TEU ships mostly built in the early 1990’es and 115 ships in total at an average
size of 2,243 TEU. The first post-5,000 TEU vessel on record was built in 1995. Only time
will tell if that is to be “next in line”, and go down in history as the largest container vessel
demolished at some point.
In spite of sliding demolition prices for general cargo ships (including container vessels), a
total of 258,000 TEU has been broken up so far. BIMCO expects another 200,000 TEU to
leave the fleet before yearend. This will level off some of the impact from the massive amount
of new ships entering into the fleet. BIMCO projects deliveries in 2013 to exceed the 1.4
million TEU mark, which will put this year at the number two mark in the rankings, second
only to 2008, where 1.5 million TEU were delivered

Outlook:

All in all, the global shipyard orderbook still shrinks, standing now at 90 million CGT, down
13% on same time last year. The containership orderbook is only down by 8% and has been
flat, with some upticks in recent four months. This may be an indication of the bottom being
reached in terms of sheer size of the containership orderbook, an indication supported by
recent ordering spree.

Global deliveries are down significantly too, as deliveries in the first five months of 2013
were 23% smaller than the period last year.

In the meantime, new orders for containerships are surfacing constantly – with a substantial
part coming from tonnage providers placing orders in the post-8,000 TEU size segments. As
per orderbook information on 26 July 2013, containerships with a combined capacity of
917,263 TEU have been contracted in 2013 – but new rumours and press releases keep
coming in to build on top of that. 85% of the 2013-orders have been for post-8,000 TEU sized
tonnage.

The discussion about the need for more supersized tonnage may very well be a debate about
perceiving it as a matter of “overcapacity or overhaul” of the service. The upgrade of a single
trade to deploy only ULCS (+10,000 TEU) is the key in the following forward-looking
projection:
In total, the fleet now holds 186 ULCS, up by 75 ships during the past 20 months. Average
weekly deployed capacity on Asia-Europe trading lanes over the past 1½ years is approx.
370,000 TEU according to Alphaliner. If we assume a 10-week rotation on all services
involved, that requires 3.7 million of ULCS tonnage if we are to target a trading lane service
exclusively by ULCS’s. Today’s 186 ships represent 2.39 million TEU, leaving 1.31 million
TEU or 94 ULSCs more to be delivered to make Asia-Europe a service of only ULCS vessels.
That will happen in mid-June 2015. Driving unit costs down is the big motivation behind this,
but the cascading effects on other trades are surely felt as well.

But before the existing orderbook of 112 ULCS’s of 1.57 million TEU can be put into active
service, the monthly deployment must go up to 396,000 TEU – a level seen only once before,
back in mid-2011, but likely to be needed in two years’ time. Overcapacity or overhaul, it’s in
the eye and scope of the beholder to judge that, but for the isolated trade it appears to be an
overhaul. Future prevalence of slow-steaming remains pivotal for a judgement regarding
overcapacity.

A new world record was set in mid-July when Mærsk Mc-Kinney Møller, 18,270 TEU
entered into active service in Busan, South Korea. She takes the number one spot from CMA
CGM Marco Polo, 16,020 TEU which entered into the Asia-Europe trading lane last year.
Have we reached the maximum or optimal size? No, surely not, as the orderbook already
holds orders for 18,400 TEU ships set for late 2014/early 2015 delivery to China Shipping
(Group) Co..

Source: Peter Sand / BIMCO

6. Why the EU will scrutinize new Maersk alliance

Carriers: Several conditions indicate that the European Commission will subject the planned
mega alliance between Maersk Line, MSC, and CMA CGM to close scrutiny, even though the
EU will not have to formally approve the large-scale collaboration, a legal expert tells
ShippingWatch.

BY OLE ANDERSEN

Published 11.10.13 at 09:24

Even though the EU Commission will not formally have to approve the P3 alliance between
the world’s three biggest carriers, Maersk Line, Mediterranean Shipping Co (MSC), and
CMA CGM, there are several reasons why officials in Brussels might want to closely
scrutinize the details of the collaboration and its consequences, says Filippo Lorenzon,
Director of Institute of Maritime Law at University of Southampton and Consultant at
Campbell Johnston Clark Ltd in London, in an interview with ShippingWatch.

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The planned launch of the collaboration, which is unprecedented in terms of the alliance’s
scope, coincides with a public consultation by the EU in 2014 concerning the application of
the EU competition law and the shipping industry.

“In May 2011 the Commission launched an investigation into the container liner shipping
sector and a review of the liner consortia block exemption is currently due in 2015, with a full
public consultation scheduled for 2014. In light of this it would not be surprising if the
Commission takes a particularly close look at the finer details of the Alliance,” says Filippo
Lorenzon.

P3 has more than 27 percent share of US container market

The EU barred the liner carrier conferences, the so-called Consortia Block Exemption
Regulation, in 2008, but this regulation still exempts “agreement[s] between two or more
vessel-operating carriers which provide international liner shipping services exclusively for
the carriage of cargo, chiefly by container.” This would include consortiums such as the P3
alliance.

“But in order for the P3 carriers to qualify for such an exemption their market share cannot
exceed 30 percent in each market in which the alliance operates,” says Filippo Lorenzon.

“Maersk, Mediterranean Shipping Co. and CMA CGM together currently have about 37% of
the world’s total container capacity although this does not necessarily mean that the P3
Alliance will exceed the 30% limit in each of the relevant market sectors. In case it will, the
Alliance will not be allowed to rely on the block exemption and the agreement will fall to be
assessed under the EU’s ordinary laws regarding this kind of agreement (Article 101 of the
Treaty),” says Filippo Lorenzon.

Since the planned P3 alliance was announced, a series of shipping analysts have studied the
carriers’ total strength on several trade routes. On the key route between Asia and Northern
Europe the Alliance, according to Drewry, will control 46 percent of the capacity, and on the
string between Asia and the Middle East, the three carriers will have 55 percent of the market.
P3’s market share on the Atlantic routes and the Pacific will be 35 percent and 29 percent,
respectively, says Drewry.

Lack of P3 plan brings overcapacity to the market

Analysts SeaIntel concluded in August 2013 in a survey of the future competitive conditions
on the routes between Asia and Europe that P3, with a total of 255 ships, 2.6 million teu,
would not only have a significantly bigger market share than all of its competitors, the
Alliance would also benefit from economies of scale that no one will be able to match.
Benefits of the P3 collaboration

According to Filippo Lorenzon, the P3 alliance is fairly well placed for the EU Commission
to evaluate the collaboration in light of the Treaty’s Article 101, the first step of which is to
verify whether the collaboration and the agreement between the three carriers has an
anticompetitive object or actual or potential anti-competitive effects. The second step, which
only becomes relevant when an agreement is found to be restrictive of competition under
Article 101(1), is to determine under Article 101(3) any benefits produced by the agreement
and assess whether these positive effects outweigh its anti-competitive effects. This
assessment is one of fact rather than law, says Filippo Lorenzon.
P3 will bring crucial savings

In other words, the agreement must contribute to improving the production or distribution of
goods or to promoting technical or economic progress.

“Given the current economic situation of the liner shipping sector, with rock bottom market
rates and enormous over capacity the P3 Alliance could go some way to improving the
situation and providing much needed stability. This would certainly qualify as contributing to
economic progress in an area in desperate need of a boost.”

Filippo Lorenzon points out that a key factor related to the EU’s approval of the P3
collaboration is that the desired improvement as regards the perpetual overcapacity issue,
market stability and general efficacy could likely not be achieved as effectively without the
creation of the alliance, and that it can be argued that any potential restriction on competition
flowing from the agreement is reasonably necessary for the attainment of the desired
efficiencies.

“This is also perhaps assisted by the fact that this agreement appears to be purely operational
in nature with a new, arm’s-length, operating company to be set up to manage the ships in the
network, with all sales and customer allocation remaining in full control of the respective
companies,” says Filippo Lorenzon.