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P3 is cost-focused just like G6, says OOCL’s Alan Tung

The P3 mega-alliance, though significant for the container shipping industry, is essentially no different from the G6 Alliance, both a cost-focused exercise, said Orient Overseas Container Line executive director and acting chief financial officer Alan Tung Lieh Sing.

“[The formation of] P3 is a significant event in the market. It’s three rather independently minded carriers coming together. This combination really allows them to further rationalise themselves and offer, possibly, a better product which at least matches the G6 product,” Tung said at the company’s half-year results briefing.

P3 members control 50%-60% of 10,000 teu and above tonnage and 80% of the 14,000 teu and above range, which should be taken note of by the industry, Tung added.

“Having said that, you should also look at P3 as not very different from G6,” he said. “It’s a cost-focused exercise that allows member carriers to be able to offer a certain coverage and product and helps rationalise cost and investment. Essentially, it’s the same type of concept, run by three very large players.”

The G6 team-up, a countermeasure to the Daily Maersk service in 2011, consists of APL, Hapag-Lloyd, Hyundai Merchant Marine, Mitsui OSK Lines, Nippon Yusen Kaisha and OOCL. It has extended sailings from Asia-Europe to Asia-US east coast trades.

By comparison, the P3 operating consortium, made up of Maersk Line, Mediterranean Shipping Co and CMA CGM, is aimed at a colossal vessel-sharing agreement that covers Asia-Europe, transpacific and transatlantic trades.

“At a macro level, the number of services will come down, meaning more cascading, which is not necessarily good news. Ultimately we need to wait and see,” said Tung.

When asked whether OOCL was tempted to buy new ships, given the bottoming-out newbuilding price, Tung said: “Having competitive fuel-efficient tonnage is very important to us. If this can only be obtained by newbuildings, I don’t see a reason why we don’t order.

“The whole purpose for us to have a strong, liquid balance sheet is that management can get newbuildings using its own initiative and not to be held hostage of financing or other things.

“We ordered the new ships in 2011. Looking at the records, certainly the price has come down since that time — and I’ll leave it there,” he said.

In early 2011, the Tung family-led carrier ordered 10 13,200 teu mega-boxships at Samsung Heavy Industries for $136m each, almost the same price for China Shipping Container Lines’ giant 18,000 teu class at Hyundai Heavy Industries earlier this year.

The Hong Kong-based line also has four 8,888 teu vessels to be delivered by mid-2014 from Hundong Zhong after some slippage.

As of June 30, Orient Overseas (International) Ltd, the Hong Kong-listed holding parent of OOCL, had $1.9 billion in cash reserves, with 23% net debt-to-equity ratio.

via: www.lloydsloadinglist.com