P3 Alliance
A huge debate has been sparked over how the local shipbuilding industry will be changed in light of the imminent embarkation of the P3 Network. P3 is an alliance among the top three global shipping companies that will cooperate on a whole gamut of businesses such as the joint purchase of bunker oil and vessels.
The local shipbuilding industry’s woes are mounting due to the greater bargaining power of P3.
However, a positive outlook also suggests that it will be a boon to the local shipbuilding industry, as low-ranking shipping companies will competitively order super-sized container ships with the P3 kickoff.
According to the industry on April 7, the P3 network, an alliance of big shipping giants, Maersk Line, MSC, and CMA-CGM will advance into the domestic market within the second quarter this year.
Amid concerns over the possible monopolization of the shipping industry, local shipbuilding companies are mulling over P3’s future impact.
Kim Sung-man, a lawyer at Kwangjang law firm, expressed his concerns, “P3 has been presenting ideas like the joint purchase of vessels, but this will lead to the accumulation of three shipping giants’ purchasing power, resulting in hefty bargaining power for them. The current balance between supply and demand will be broken, causing a market shift, and Korea, as a shipbuilding leader, can be hard hit.”
This is because ship owner’s superior bargaining power could lead to lower ship prices.
A shipbuilding industry associate relayed, “Normally, in shipbuilding contracts, ship owners have the upper hand. The formation of P3 will exacerbate the situation, and shipbuilders will be put at a disadvantage in ship price negotiations. In the worst case scenario, price dumping may be even possible.”
However, there is optimism that the P3 alliance can serve as a blessing to the local shipbuilding industry.
One shipbuilding associate said, “There is a trend that low-ranking shipping companies and other shipping alliances against P3 are placing orders for super-sized container ships. Maersk placed an order for a 18,000 TEU ship followed by G6’s move to order another 18,000 TEU ship, while the CKYHE alliance is focusing on 14,000TEU vessels. A new demand is being created on the back of the new market shift.” He added, “In the end, P3 was created to pursue efficiency in vessel operation, and later, to keep up with that efficiency, orders will be placed. A close attention is being paid to its effect, considering that the amount of orders is expected to be conservative.”