Shipping mergers to remake global alliances

April 13, 2016 09:28
COSCO is considering joining Ocean Three or leading a new alliance with CSCL. Photo: Bloomberg

Some of the world's biggest container operators are seeking regulatory approvals for new mergers, which could make major shipping alliances much bigger by month's end, the Wall Street Journal reports.

The changes come as Chinese majors China Ocean Shipping Co. (COSCO) and China Shipping Group Co. are trying to get their recently completed merger approved by European Union and US regulators, the newspaper said.

The Chinese watchdog already has given its green light to the merger.

France’s CMA CGM SA also is seeking regulatory approvals by all three regulators for its US$2.4 billion acquisition of Singapore’s Neptune Orient Lines Ltd. (NOL), announced in December.

 “Chances are that the alliances you see today will change significantly over the next two weeks,” said William Doyle, a commissioner at the Federal Maritime Commission of the United States.

“The alliances have in fact changed already because of the recent consolidation among four major carriers,” Doyle said. “We are expecting their proposals for regulatory approvals.”

The European Commission will decide on the merger of CMA CGM and NOL by April 29 at the latest.

CMA CGM and China Shipping Container Lines, the container unit of China Shipping Group, currently belong to the Ocean Three alliance along with Dubai-based United Arab Shipping Co.

The alliance has a 22 percent market share of all cargo moved between Asia and Europe.

“We are becoming a larger shipping line and we are in the position to select the partners with whom we want to do business,” Rodolphe Saade, vice chairman of CMA CGM, was quoted as saying.

“We are discussing with the new China Shipping Group, but we are also discussing with others.”

COSCO belongs to the CKYHE alliance, which controls 25 percent of the Asia-Europe trade.

Industry leaders A.P. Møller-Maersk A/S of Denmark and Geneva-based Mediterranean Shipping Co. comprise the 2M alliance, which has a 34 percent market share.

COSCO is considering joining Ocean Three or leading a new alliance with CSCL, the Journal said, citing people familiar with the situation.

CMA CGM has told European regulators that it will withdraw NOL from another alliance, called G6, which controls an 18 percent market share in Asia-Europe.

NOL’s container unit, APL, expects to stay in G6 until the first quarter of 2017.

“Regardless of the regulators, the alliances themselves can’t accept merged entities where their members belong to different groupings,” said Chris Welsh, secretary-general of Global Shippers’ Forum, which represents cargo owners.

“I expect the four existing alliances to become three after the merger shake-up and some carriers being left out of the new alliances,” said Lars Jensen, chief executive of Copenhagen-based SeaIntelligence Consulting.

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