By Clement Tan
June 20 (Bloomberg) — China rejected a global shipping alliance to protect companies navigating a choppy market. The decision will probably hurt cargo firms’ earnings, including its own.
The Commerce Ministry’s June 17 announcement spiking a deal between the world’s top three container carriers — known as the P3 and led by Copenhagen-based A.P. Moeller-Maersk A/S (MAERSKB) — may undermine recovery in an industry still reeling from the 2008 financial crisis. Overcapacity and low charter rates are likely to stay, jeopardizing earnings, including at China Cosco Holdings Co. (1919) and China Shipping Container Lines Co. (2866), the country’s two biggest.
China’s move “is a hollow victory for Asian liners,” said Paul Dewberry, an analyst at Bank of America Corp.’s Merrill Lynch, in a June 17 note. “This commoditized, fragmented and loss-making industry is in need of P3-type development to force consolidation. The resulting abandonment of P3 by its members will ultimately only prolong the current industry slump.”
Maersk, Mediterranean Shipping Co. and CMA CGM SA agreed last June 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 containerization became global in the 1970s.
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