Although the U.S. Federal Maritime Commission is expected to approve the P3 alliance by the end of March 2014, there will conditions attached to ensure fair treatment for smaller competitors, freight forwarders and fuel providers; along the world’s busiest trade routes. Albeit good news for the world’s three biggest container-ship operators (in terms of capacity,) the alliance still needs European and Chinese approval; which is not expected until officials in the United States deliver their decision.
It is going to be a period of deliberations, where conditions on the P3 operations will be attached … The FMC already sees this as more of a partnership rather than a merger, so if it gets the necessary safeguards for fair competition, the P3 will be approved.
If approved, the P3 would control an estimated 43 percent of the Asia-to-Europe container shipping market, 41 percent of the trans-Atlantic market and about 24 percent of the trans-Pacific market. This has raised concerns from competitors and other industry stakeholders:
- Small shipping companies are worried that the P3 will eliminate them from many routes.
- Freight forwarders, importers and exporters say they will have no control in negotiating freight rates with the container shipping companies.
- Fuel suppliers are concerned they won’t be able to separately negotiate fuel prices with the three vessel operators.
For Maersk Line, CMA CGM and the Mediterranean Shipping Co., it makes good business sense to share ships and port facilities, from Shanghai to Rotterdam, New York and the U.S. West Coast. It is hoped that this initiative will help the companies recover from the slow global economic growth, stubbornly low freight rates and high fuel costs, that have been eating away at their profits.
Every day in the United States, countless numbers of shipping containers arrive to bring consumers the products they desire. After their arrival, these 20 or 40-foot-long containers are ready to ship the next cargo load. Many U.S. farmers have been taking advantage of these empty versatile containers, and are loading them with grain to ship around the world. Archer Daniels Midlands (ADM), a large agribusiness company, constructed a 275-acre container shipping rail yard facility which receives thousands of containers for U.S. farmers to take advantage of. The growing importance of the export market to U.S. farmers has contributed to the rise in demand for shipping containers and will only continue to rise in both the short and long-run.
Although not official yet, it has been reported that American farmers have shipped a record $140 billion worth of product overseas in shipping containers; the last year. This has been a break-through in the U.S. agribusiness sector and has led to new methods of shipping product, such as containerization. In contrast to the traditional method of shipping massive amounts of a product, container shipping allows buyers to receive smaller shipments. This method has been extremely accommodating for a sluggish global economy and in countries without the infrastructure to receive large deliveries. Another reason to utilize shipping containers is to protect the product. If farmers want to deliver a product that has been well taken care of, not crushed in the bottom a ship, they need to have it in smaller quantities. In addition to shipping containers, a growing demand in specialized grain products has contributed to the record number of products shipped overseas.
As container freight is becoming a crucial part of a business that gets inventory to customers who desire smaller shipments, U.S. farmers will continue to take advantage of containers that enter the U.S. every day and are ready for immediate use. ADM’s new facility can currently handle 50,000 containers every year and the company hopes to triple its capacity in coming years. As you can imagine, this is great news for farmers who want to tap into the overseas demand for products grown in the United States, as well as for investors who are reviewing container investments.