Merger a Possibility for China’s Largest Container Lines
Discussions are currently underway that could mean the merger of China’s two largest shipping lines, China Ocean Shipping Co. (COSCO) and China Shipping Group.
According to several media sources including the South China Morning Post, the talks are being held at the behest of the Chinese government which is “urging the two companies to draft a preliminary merger plan within three months starting from August.”
Beijing’s role in the possible merger is seen as an indication of the government’s strategy to consolidate, reform and reorganize the operations of its state-owned companies as the overheated Chinese economy continues to sputter and its trade number fall.
Currently, COSCO is the sixth largest container carrier in the world with an owned and chartered fleet that boasts a total box capacity of more than 866,200 TEUs (20-foot Equivalent Units).
Factoring in China Shipping’s fleet capacity of 699,606 TEUs, the combined total of 1.57 million TEUs would boost the merged company’s ranking to fourth on the list of the world’s largest container carriers, behind Denmark’s Maersk, the Mediterranean Shipping Co., and CMA-CGM, but ahead of Hapag-Lloyd and Evergreen Line.
Industry analysts say a merger of both Chinese carriers would be complicated as both companies have totally separate global marketing and management operations and have, over the past year, placed independent orders for new build ultra-large tonnage.
In addition, both COSCO and China Shipping have slot-charter agreements with other carriers with China Shipping is a member of the Ocean Three alliance with CMA CGM and United Arab Shipping Co., and COSCO is a member of the ‘CKYHE Alliance’ with K-Line, Yang Ming, Hanjin, and Evergreen.
In February, the two lines announced that they had forged a cooperative “resource-sharing” alliance covering their container shipping and terminal operations, logistics services, as well as shipbuilding and repair activities.
At the time, the COSCO Group said the agreement, seen by some as the first step toward an eventual merger, “will help the companies achieve advantage complementation and better prepare for industrial changes.”
Two months later, China’s state media had reported that Beijing was planning to consolidate several of its state-owned giants that would include the merger of China Cosco, CSCL, Sinotrans and China Merchants Group.
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