Merger of Two Chinese Shipping Giants

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On September 2nd, the Chinese Government ordered the integration of business operations of state-owned China Merchants Energy Shipping (CMES) and Sinotrans & CSC Group to reform its state-run shipping sector.  Since August, both the companies and their respective subsidiaries suspended trading from stock exchanges in anticipation of a “major announcement.”

The two shipping companies have already set up a joint venture in 2014, China VLCC, intended for operation of supertankers.  There is an anticipation of a merger between two other Chinese shipping majors, China Ocean Shipping Group (Cosco) and China Shipping Group to curb losses stemming from overcapacity in the market.  Consultancy firm Drewry predicts that the merger is likely to cause a cascading effect on existing carrier alliances and further carrier mergers in Asia, affecting industry competition.

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