July 10 (Bloomberg) -- A.P. Moeller-Maersk A/S and MSC Mediterranean Shipping Co., the world’s top two container-shipping lines, agreed to share vessels, reducing the scope of a partnership after Chinese regulators blocked a proposal for a three-way alliance.
The 10-year pact is for Asia-Europe, Transatlantic and Transpacific routes, and covers 185 ships, Maersk said. That’s less than the 255 in the bigger plan, which would have included Marseilles-based CMA CGM SA, the world’s third-biggest carrier.
China’s unexpected rejection of that proposal, dubbed P3, forced the Danish company and Paris-based MSC to trim their ambitions. The new partnership is expected to improve network efficiency and vessel capacity, Maersk said. The shipping company is struggling with overcapacity and falling prices which will persist for “years to come,” Vincent Clerc, the chief trade and marketing officer at Maersk Line, said last month.
“They are very anxiously refraining from calling it an alliance,” said Thomas Wybierek, a shipping analyst at Hanover, Germany-based bank Norddeutsche Landesbank Girozentrale. Maersk needs to make sure its new triple-E vessels, the largest container ships, are used at full capacity, and the agreement should help stabilize freight rates, he said.
Maersk earlier this week wrote down its Brazilian assets by $1.7 billion after oil volumes from acquired fields came in at the low end of the company’s expectations. Maersk purchased stakes in three oil blocks in 2011 for $2.4 billion.
Global container volumes are slowly recovering. Shipments increased an annual 5.7 percent in May, up from 4.5 percent in April, according to Container Trade Statistics. A 13 percent increase in Asia-to-Europe volumes led the improvement.
Under the new agreement with MSC, Maersk Line said it will contribute about 55 percent of the total capacity. Both parties will keep their independent commercial relationships with customers, and they won’t jointly own vessels, Maersk said.
“One reason why the Chinese blocked P3 was that the three carriers would have dominated the market with a 47 percent share on the Far East-Europe route,” Wybierek said. “Maersk and MSC alone still control 35 percent of that market, so it remains to be seen whether that will get approval.”
The companies expect the agreement to begin in early 2015 after getting regulatory approval, Maersk said.
Maersk shares declined 0.9 percent to 13,300 kroner at 11:57 a.m. in Copenhagen. The stock has returned 16 percent to date this year, compared with an 7.6 percent decline in the Bloomberg Marine Transportation Services Index.
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