Hong Kong and London - China blocked the formation of a global alliance by the world’s three biggest shipping lines, ignoring Western approval of the plan and sending AP Moeller-Maersk shares tumbling the most in two years.

The Chinese Ministry of Commerce said on Tuesday that the proposed P3 vessel-pooling accord, which included Mediterranean Shipping and CMA CGM, would “restrict competition” on the busiest Asia-Europe container routes.

“The decision does come as a surprise,” Maersk chief executive Nils Smedegaard Andersen said after it announced that the P3 plan would be scrapped. “I did not foresee problems in China. We only received what I would call positive feedback.”

Maersk and its two allies agreed last June to establish an operational pact with the aim of reducing costs on Asia-Europe, Trans-Atlantic and Trans-Pacific routes. Container lines have been battling industry overcapacity after a boom in ship orders collided with the global financial crisis, triggering the worst slump in prices for the carriage of cargo since containerisation became global in the 1970s.

“If there had been a Chinese partner in this, I think it could have gone through,” said Susan Ross, who heads up international trade at Mitchell Silberberg & Knupp. “China wants a global position in shipping just as in every industry.”

Shares of Maersk, the world’s biggest container line, fell 5.3 percent to 13 290 kroner (R26 029) in Copenhagen on Tuesday, the steepest drop since May 2012. The decline pared its 2014 gain to 13 percent for a market value of 285 billion kroner. China Cosco Holdings, China’s biggest shipping company, fell 1.3 percent at 10.44am in Hong Kong trading.

Nippon Yusen KK, the world’s largest carrier of vehicles by sea, fell 2 percent to ¥294 (R31) at the 11.30am break in Tokyo trading. Mitsui OSK Lines, the operator of the world’s largest merchant fleet, dropped 1.6 percent to ¥374.

Maersk accepted the verdict and with no alternative plan in hand it would now “give up on P3”, Andersen said.

France’s CMA CGM and MSC are closely held.

“The surprise is that China has not approved this plan even after regulators in the US and EU have given it the go-ahead,” said Lawrence Li, China transportation analyst at UOB Kay-Hian Investment Consulting.

The companies had planned to commit 255 vessels deployed on 29 trade loops to a joint centre that would have run a combined fleet independently. Maersk was slated to contribute 42 percent of the total, including its Triple-E class, the largest-ever container ships with a capacity of 18 000 boxes.

China’s rejection of P3 comes after the US Federal Maritime Commission approved the alliance in March and the European Commission closed an EU antitrust probe this month.

Trade has been a mainstay of China’s economic development since former leader Deng Xiaoping first opened up the nation more than three decades ago. It entered the World Trade Organisation in 2001, helping secure annual growth in excess of 10 percent on average in the following decade.

While policymakers in the world’s second-largest economy sought to reduce its reliance on commerce in the aftermath of the 2009 recession, exports remain a source of strength.

Shipments abroad advanced 7 percent last month from a year earlier, with imports down 1.6 percent, a government report showed. China recorded a $35.9bn (R386.7bn) surplus for the month.

The Commerce Ministry said that the P3 plan might have benefited Maersk, MSC and CMA CGM at the expense of other operators, and that in “numerous discussions” the applicants had failed to show that the positive elements would outweigh any adverse impact. The companies – which always pitched the arrangement as “operational, not commercial” – controlled a combined 46.7 percent market share, it said. The “closely co-ordinated joint operations” proposed in P3 would also have been substantially different from the “loose co-operation” of current alliances, the ministry said.

The two main existing accords were G6 – Germany’s Hapag-Lloyd and five Asian carriers, and CKYHE, which feature Cosco Container Lines, China’s largest. – Bloomberg