There are additional consolidation related events underway in ocean container shipping. The Wall Street Journal cites informed sources as indicating that China’s two ocean container carriers will merge by January. China Ocean Shipping Co. (Cosco Group) and China Shipping Group Co. have reportedly been working on a tie-up for several months, responding to Chinese government directives to consolidate similar state-owned enterprise in order to more effectively compete in global markets. This consolidation is expected to create the world’s fourth-largest container shipping carrier. According to the report, the value of this merger could exceed $20 billion, accounting for 8 percent of global volumes.
This news comes in midst of other industry and business media reports that Singapore based Neptune Orient Lines (NOL) is in talks with Maersk Line and CMA CGM, with the latter now favored as be the final suitor. Neptune and its affiliates represent 3 percent of global container shipping volumes. According to one report, NOL, which is 65 percent owned by Singapore sovereign-wealth fund Temasek Holdings Pte. Ltd., has been looking for a buyer for months. The company reported a $96 million loss in the third quarter and sold its profitable logistics business, APL Logistics Ltd., for $1.2 billion to Kintetsu World Express Inc. in May.
Both of these developments are continued but not expected developments for an industry that has significant excess capacity and is losing any leverage to increase tariff rates to expected levels.
Once both of these entities are merged, readers should not be surprised by other consolidation developments as remaining carriers feel the pressure to compete with now larger and perhaps more cost-efficient survivors.
