Cosco group and China Shipping Container Lines (CSCL) have moved into the advanced stages of their merger after announcing that they are now focusing on merging their container shipping units, with terminal-management operations also being involved to a lesser degree, at a total valuation of between US$15-20 billion, according to the Wall Street Journal.
Cosco and CSCL operate 175 and 156 container-ships, respectively and the proposed merger will see both carriers being the fourth largest container shipping group globally.
Tina Liu, China Country Manager at London-based Shipping Analysts Drewry Maritime Research, said: “It makes no sense for two state Chinese container carriers to sail the same trade routes, serve the same clients and directly compete for business. But while China has long opened up to a competitive market environment, it’s still very much communist in employment issues.
“So the talks involve how both companies will retain their staff by moving them around to other businesses they are active in, and that’s a complicated exercise.”
Basil Karatzas of New York-based Karatzas Marine Advisors & Company, said: “It will be a stunning example of consolidation in the generally very fragmented shipping industry. It will most likely trigger more transactions, but this is not a ‘plain vanilla’ merger of two companies, but of two large companies, where the large get larger.”
The merger between both carriers also comes at a time of decline as the companies have seen a combined loss of more than US$900 million in the past five years.
If both companies decide to follow through with its merger, it could mean that each carrier leaves its current alliance or see both join one of its prospective alliances, reshaping the landscape of liner alliances and causing fresh challenges for ports and terminals.
Cosco is currently a member of CKYHE and CSCL with the ‘O3’ alliance.