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  October 31st, 2016 | Written by

BREAKING NEWS: Three Japanese Ship Lines to Merge Container Operations

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  • NYK, MOL, and K Line will spin off their container divisions to form a new company.
  • The three merging Japanese carriers are among the founders of THE Alliance.
  • Merger of Japanese container carriers will immunize K Line from a foreign takeover.

The three largest Japanese container carriers, announced that they are merging their container operations. Nippon Yusen Kaisha (NYK), Mitsui OSK Lines (MOL), and Kawasaki Kisen Kaisha (K Line) will spin off their container divisions to form a new company.

The three carriers are among the shipping companies that formed THE Alliance, which is scheduled to go operational next April.

Observers say the transaction is designed to immunize the carriers from a takeover from abroad. K Line’s container assets in particular have landed in the cross-hairs of potential acquiring concerns, report indicate.,

Combined, the three carriers will have a container fleet of 1.4 million TEU and 110 vessels, making it the the world’s fifth largest container carrier. NYK will have a 38-percent share in the new venture with K Line and MOL getting 31 percent each.

The deal also includes worldwide terminal operating businesses outside of Japan.

A statement by the three companies pins the merger on adverse market conditions, noting that “the structure of the industry is changing through consolidation.”

Once the merger passes regulatory muster, it would become operational next April 1.

Most container shipping companies are operating at a loss, the carriers’ statement noted. “The three Japanese companies have made efforts to cut cost and restructure their business,” thety continued, “but there are limits to what can be accomplished individually. Also, in order to keep a membership of a global alliance continuously, it would be necessary to have above a certain business scale level.”

With the three Japanese carriers combining, the number of global carriers shrinks to 13, down from 20 six years ago.

Experts say the move is good for the carriers, for THE Alliance, and for the industry. As a combined unit, the carriers’ will presumably be able to cut costs both on their operational networks and on their administrative overhead. Merging and rationalizing their vessel services will likely remove capacity from bloated trade lanes which could lead to higher and more stable pricing.