Drewry: Shipping Line Merger Imminent?


Speculation has arisen from the shipping industry around Neptune Orient Line (NOL) and Orient Overseas International Ltd (OOIL) merging a few weeks after NOL’s announcement on February 17, 2015 that it will sell off its logistics unit, APL Logistics, to Kintetsu World Express for US$1.2 billion.

The planned sale of APL Logistics is part of a growing trend among liner companies to sell off ‘non-core’ assets to repair balance sheets that have seen debt pile up from years of operating losses.

NOL made a loss of $76 million in 2014, a sum which would have been far steeper without the profitable APL Logistics’ contribution of $66m.

APL’s recent history of losses does call into question why OOIL would be interested in joining forces. Over the past five years, APL has cumulative Core EBIT losses of $581 million, whereas OOILs container and logistics unit has generated profits of $1.6 billion.

As members of the G6 Alliance, both companies own just under 3% of the world’s total containership capacity.

Drewry believes that if the two container lines were to merge, it would become the world’s fourth largest operator, with an active fleet of approximately 1.1 million TEU.

In a speech at the recent Navis World Conference, Ron Widdows, former APL president and now chairman of the World Shipping Council said that a merger of APL and OOCL would not make that much difference to the industry.

The Drewry View: A pairing of APL and OOCL is highly doubtful but in any case it will take more than one merger of big carriers to reshape the container shipping market.

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