Asia/Pacific News
COSCO And CSCL Merger Talks Rumoured to Be at an Advanced Stage
If industry rumours are to be believed, talks of a merger between state-owned China Ocean Shipping Co.(COSCO) and China Shipping Group Co. are now in advanced stages as the two companies look to join its two containership businesses, the Wall Street Journal reports.
The deal is estimated to be worth between $15 billion and $20 billion and could go even higher, with the merger expected to form the world's fourth largest container carrier by capacity.
"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," said Tina Liu, China country manager at Drewry.
The two companies are reportedly focusing on linking its two containership businesses, though its tanker and terminal-management operations are also involved to a lesser degree.
Labour issues which adhere to communist ideals are reportedly at the heart of the talks, though concerns over each companies' membership in competing shipping alliances is also expected to be a problem.
"They will either have to join the same alliance or pull out from one or both, joining a third grouping, which will trigger a long process of regulatory approvals by the Federal Maritime Commission and the EU's Competition Commission."
COSCO is part of the CKYHE alliance, while China Shipping Container Lines (CSCL) is part of Ocean Three.
Experts say that the move will also likely set off a domino reaction of mergers.
"It will be a stunning example of consolidation in the generally very fragmented shipping industry," said Basil Karatzas of London-based Karatzas Marine Advisors & Co.
Earlier this year, Ship & Bunker reported that Drewry had warned that the merge may damage competition on the East-West Trades.
