Cosco Merger to Change Industry Dynamics?
The new shipping alliance between Chinese shipping companies Cosco and China Shipping Container Lines (CSCL), which is now due to come into operation on February 18, 2016, is anticipated to cause a wave of consolidation due to the size of its merger and thus change the dynamics of seaborne trade, according to the Wall Street Journal.
Lars Jensen, CEO of Sea Intelligence Consulting in Copenhagen, Denmark, said: “The [China Cosco Shipping] merger will put an end to the two companies competing for the same clients in container trade, but it doesn’t come without challenges.
“An obvious one is that cargo owners, especially in China, will now have fewer choices to ship their goods and may abandon CCSC if a foreign competitor gives them better pricing.
“They will either have to pull out from at least one of the alliances or pull out from both and form a separate alliance hoping to attract other operators to join them.
“But with capacity commitments and other sharing of assets already in place, it won’t be an easy task.”
Cosco will handle the container shipping side of the merger, while CSCL will handle the merger’s financing and ship leasing.