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Shipping/Land transportation-Busan port crisis due to P3 Network?

April 14, 2014 08:55|April 14, 2014 08:55
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The P3 Network, the alliance of the world’s three largest shipping lines – Maersk (Denmark), MSC (Switzerland) and CMA-CGM (France) – should begin operation from mid-2014. The three shipping lines announced they would form the alliance a year ago. The P3 Network gained approval from US Federal Maritime Commission (FMC) in March 2014, and Maersk expects to get approval from Europe and China soon. Meanwhile, the shipping industry is concerned about the effects from P3 gaining additional market share given its strong cost competitiveness and marketing ability. Of note, the three P3 carriers account for 41% of Asia- Europe routes and 24% transpacific routes. When the alliance was first announced, only the shipping industry was concerned, but worries are now expanding to the stevedoring industry.

Recently, these concerns have been addressed frequently by the media as fears are growing that the P3 carriers’ Northeast Asia transit1 bases may shift from Busan Port in Korea to Ningbo Port in China as CMA-CGM owns a container terminal in Ningbo. If this happens, transit container volume (accounting 49.5% of the total throughput) at Busan Port would decline. In fact, Chosun Biz reported on April 10 that P3 Network decided to use Shanghai Port and Ningbo Port as its main ports, and would reduce dependence on Busan Port, which has served as an intermediary base.

Transit account for 49.5% of full-year throughput
Busan Port handled 17.7mn TEU2 in 2013, and is the fifth largest port in the world (in terms of throughput volume). Busan Port is divided into the North Port and New Port, and 62% of throughput is handled at New Port. Throughput is comprised of imports (25%), exports (25.5%) and transit (49.5%). Of the transit volume (8,743,453TEU), P3 Network carriers’ account for 20.5% of volume (1,793,542TEU). Concerns are growing that this transit volume will decrease, although the size of the decline remains uncertain.
Stevedoring firms located in Busan New Port may be affected 30% of transit throughput at Busan Port is handled in North Port, and the other 70% is handled at New Port. Most global carriers use New Port for transit. As such, if the three P3 carriers move their transit base to Ningbo, stevedoring companies located at New Port would be affected negatively. Among listed companies, Hanjin Transportation (002320), Hanjin
Shipping (117930) and Hyundai Merchant Marine (011200) have stevedoring subsidiaries at New Port.
*Source: Korea Investment & Securities Co.