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THE P3, FROM BEGINNING TO END IT ENDED SO fast. With one statement, the count- less hours and money spent over the last year to prepare for one of the biggest — if not the biggest — game-changers in global container shipping went up in smoke. When China's Ministry of Commerce rejected the P3 Network on June 17, it closed the book on the massive vessel-sharing agreement among the three largest global container lines — Maersk Line, CMA CGM and Mediterranean Ship- ping Co. But the book is far from closed on the creation of major VSAs that aim to go beyond loose slot-sharing arrangements to create a highly structured alliance. Container lines that collectively have lost billions of dollars in four of the last five years have little choice but to share the operational burdens with each other via VSAs, lest they risk alienating their financial backers. With mas- sive overcapacity and moderate demand leav- ing little hope for sizable and sustainable rate increases, and with the benefi ts of slow-steaming already built in, VSAs are one of the liner opera- tors' few options to cut operating costs, said Lars Jensen, CEO of SeaIntel Maritime Analysis in Copenhagen. Even so, the demise of the P3 raises a myr- iad of questions including how regulators will approach other major VSAs. Carriers, Jensen said, will pare down the scale of future major VSAs after seeing Maersk, CMA CGM and MSC spend a year planning the P3, only to see regula- tors deny it. The question also remains whether major VSAs will provide shippers, forwarders and others with better service and reduce rate vola- tility. The answer to that question rests largely on whether Maersk, MSC and CM A CGM respond by tying up with each other, smaller lines or both — and how competing alliances respond. A CHANGING REGULATORY LANDSCAPE Whether China's rejection of the P3 was right or wrong, the country made itself a regulatory force. Unlike its U.S. and European counterparts, Chinese authorities took issue not just with the market share the three carriers would control on the Asia-Europe lane but also how they would control the world's largest trade lane itself. The Ministry of Commerce saw the integrated slow- sharing approach made possible through the P3 "Network Center" as evidence the three carriers would create a de facto shipping line. The P3 would have controlled up to 47 percent of the Asia-Europe trade lane, according to MOFCOM. "The regulators' assessment of alliances' ability to exert market power could then rest on the absence of a coordinated operations center for both CKYHE and G6, which would work on a traditional alliance structure within a loose framework of coordinated slot sharing with individual carriers retaining control over the vessels they operate," research fi rm Alpha- liner said. Bot h a rg uments were "f ig leaves" for MOFCOM's defense of China's two national lines, Cosco and China Shipping, according to an execu- tive who is closely tied to the decision but asked to remain anonymous. Rather than decreasing competition, the P3 would increase it by provid- ing a more competitive product, the executive said. Speculation has swirled for months that China wanted the P3 to include Cosco, but MOFCOM has given few details on the state of negotiations with the alliance partners. The P3 carriers attempted several times to propose changes to the VSA to make the deal palatable to MOFCOM, without success, according to a report by global legal fi rm Skadden, Arps, Slate, Meagher & Flom LLP & Affi liates. "I THINK THE LESSON LEARNED (for the FMC) IS THAT MAYBE OUR EXPERTS AND ANALYSTS MISSED SOME OF THE THINGS THE CHINESE SAW. IF THE ALLIANCE IS GLOBAL, WE NEED TO TAKE A GLOBAL VIEW OF IT." June 18, 2013 Maersk Line, Mediterranean Shipping Co. and CMA CGM announce plans to form a long- term alliance in the east-west trades. The P3 Network is designed to operate a fl eet of 255 ships totaling 2.6 million 20-foot-equivalent units of capacity on 29 service loops on the Asia-Europe, trans- Pacifi c and trans-Atlantic trades. The original launch date is sometime in the second quarter of 2014. Oct. 11, 2013 The Global Shippers' Forum voices concern about the P3 coalition, raising questions on rates for shippers and the potential elimination of competition. The group compiles a list of questions and submits it to the European Commission Competition Directorate in Brussels, even though the alliance doesn't require EU consent. Oct. 20, 2013 The anticipated structure of the network takes shape, with 28 service loops. The P3 carriers will jointly operate eight services from Asia to North Europe, fi ve between Asia and the western Mediterranean and the Black Sea, fi ve loops in the trans-Pacifi c to U.S. West Coast ports and four loops from Asia to U.S. East Coast ports, as well as fi ve services from Asia to the U.S. West Coast. Oct. 22, 2013 Mario Cordero, chairman of the U.S. Federal Maritime Commission, asks regulators in the EU and China to travel to Washington for talks on the alliance and its impact on global maritime shipping. The summit is later scheduled for Dec. 17. 10 THE JOURNAL OF COMMERCE www.joc.com JULY 7.2014