A China Ocean Shipping Company COSCO-China Shipping Container Lines (CSCL)merger makes financial sense, but would have huge implications for competition in the container shipping industry, according to Drewry Maritime Research.
Drewry Shipping Consultants has released a report examining the consequences of a rumoured merger between China’s two shipping giants.
The merger will have a domino effect on the existing alliance structure of the container shipping industry and could see other Asian countries follow China’s lead.
The merger will have a severe impact on the current shipping alliances, with the Middle East’s United Arab Shipping Company standing to lose the most.
Japanese and Taiwanese carriers to seek consolidation of their national carriers, strategies that could undermine competition in the sector, says the London research house.
"Based on today's fleet the combined entity would comfortably move into fourth place with a total fleet in excess of 1.5 million TEU, giving a world share of around 8 percent," states Drewry. This, says Drewry, would result in changes to alliances that participate on the East-West trades, UASC being one of the major lines involved.
A combined Cosco-CSCL entity would be the world’s fourth largest container shipping company and generate huge financial efficiencies – the two carriers have racked up $911 million in operating losses (EBIT) from container operations over the last five years.
The two alliances to be impacted are the Ocean Three (CMA CGM, UASC, CSCL) and CKHYE (COSCO, K-Line, Hanjin, Yang Ming, and Evergreen). The merged Chinese shipping line would need to surrender participation in one of the alliances.