The two state-owned Chinese shipping giants China Ocean Shipping Co. (Cosco) and China Shipping Group Co. are currently the world’s sixth and seventh largest container shipping firms, respectively, according to consultancy Alphaliner.
Both the companies have intimated via their Hong-Kong listed subsidiaries that they propose to carry out a merger plan, details of which are being worked out by a 5-member team– 3 from China Shipping and two from Cosco. They are working on the integration proposals and merger possibilities to be presented to authorities in Beijing soon. They plan to start the merger proceedings by early 2017.
Both the companies have temporarily suspended trading their shares since August. Given that the merger would be complicated and asset reorganization would be involved and the transaction proposals need to be discussed with intermediaries and regulatory authorities. It is also a fact that the two companies are part of competing alliances—Cosco is allied with the “CKYHE grouping” while the CSCL with the “Ocean Three alliance”. These technical issues too would need sorting.
Post-merger, they would be the world’s fourth-largest container operator by capacity and one of the world’s largest shipping lines. The combination could rank them number one in the dry bulk and tanker trades in terms of fleet size.
The past few years have seen the world’s 20 biggest container operators form alliances that have resulted in great savings in their operational costs through sharing of ships, port calls, and networks. China too is undergoing significant consolidation at present – not just with the lines, but also at shipyards and ports.
Source: The Wall Street Journal
