China Merges Shipping Firms in Reform Push

 

Sinotrans & CSC Holdings Co., the nation's third largest shipping company, will become a wholly-owned subsidiary of China Merchants Group (CMG). Earlier in December, China approved the merger of another two of its biggest state-owned shipping companies, China Ocean Shipping Group (Cosco) and China Shipping Group.

 

China Cosco Holdings is selling its entire stake in a bulk shipping company to parent Cosco Group for 6.77 billion yuan ($1.04 billion). Meanwhile, Cosco Pacific will buy a port operator from China Shipping Container Lines for 7.63 billion yuan. After all necessary deals are completed, China Cosco will specialize in container shipping and Cosco Pacific in operating ports.

 

China Shipping Development, owned by China Shipping Group, will focus on transporting petroleum products, liquefied natural gas and other items, while fellow group company China Shipping Container Lines will deal with maritime financial services.

 

The four shippers also technically will improve their financial position by transferring unprofitable businesses to their unlisted parent companies, but investors could have a harder time determining what's really going on behind the books.

 

Consolidation of the liner industry fits with the bigger picture of increasing state-owned entity reform in China.  The merger between Cosco Group and China Shipping Group will create the world's fourth-largest shipping company by capacity.