Date
21 October 2017
A China Ocean Shipping Co. (Cosco) container ship is shown in Oakland. A merger between Cosco Group and China Shipping Group Co. would create the world’s fourth largest container operator by capacity. Photo:  Bloomberg
A China Ocean Shipping Co. (Cosco) container ship is shown in Oakland. A merger between Cosco Group and China Shipping Group Co. would create the world’s fourth largest container operator by capacity. Photo: Bloomberg

Cosco, China Shipping in advanced merger talks

State-owned shipping giants China Ocean Shipping Co. (Cosco Group) and China Shipping Group Co. are in advanced negotations on combining their container shipping businesses.

If successful, the deal would create the world’s fourth largest container operator by capacity, the Wall Street Journal reports.

Also, it would give further impetus to Beijing’s efforts to force consolidation in the highly fragmented sector.

Discussions are complex and would require government and regulatory approval that has proved difficult to predict.

In August, companies said they were in unspecified talks with each other. Shares of their subsidiaries have been suspended ever since.

The merger will mostly involve the groups’ container-shipping units — Cosco Container Lines Co. and China Shipping Container Lines Co. — although other units of the two groups, such as their tanker and terminal-management operations, may be involved to a lesser degree, one person familiar with the situation said.

Which units will merge is still under consideration, a source said, but the value of the merger may range from US$15 billion to US$20 billion or more, based on the market capitalization of the two parent companies’ listed subsidiaries and after any divestitures.

Cosco Container Lines operates 175 container vessels and CSCL operates 156, making them the world’s sixth and seventh largest container companies in terms of capacity, with a combined global container capacity share of around 8 percent.

The merged entity would become the world’s fourth-largest container company, behind the Maersk Line unit of Denmark’s A.P. Møller-Mærsk A/S, Geneva-based Mediterranean Shipping Co. and France’s CMA CGM S.A.

Container shipping, which moves the vast majority of the world’s manufactured goods, is a highly fragmented industry marred by what analysts estimate is a capacity glut of around 30 percent above demand.

This year, that has led to freight rates barely covering the carriers’ fuel costs.

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