October 31 - Three of Japan's largest shipping companies have announced that they plan to merge their container shipping and overseas terminal operations as the industry struggles with overcapacity and mounting losses.
The statement from Mitsui OSK Lines (MOL), Nippon Yusen Kaisha (NYK) and Kawasaki Kisen Kaisha ("K" Line), says they are forming a joint venture to unite their container shipping operations and terminal management businesses outside Japan.
The three shipping lines said they hoped to attain a more competitive scale through their joint venture. It will rank sixth worldwide, with a combined fleet capacity of 1.4 million teu and a seven percent global market share, they claim.
Some JPY110 billion (USD1.1 billion) is expected to be realised in savings from the merger.
"Due to low oil prices, sluggish cargo demand and over-supply of trade capacity, container freight rates are at historic lows," the statement said, adding that there were limits to how much the three companies could manage to save on their own.
NYK will contribute 38 percent of the equity in the approximately JPY300 billion (USD2.9 billion) joint venture, with MOL and "K" Line each providing 31 percent.
The companies' terminal operations in Japan and other businesses, such as bulk shipping, ferries and logistics will not be merged.
The deal, which is subject to approval by regulators, foresees the establishment of a joint venture company on July 1, 2017, which will start business operations on April 1, 2018.
The latest news is further evidence of the various steps being taken in the container sector to counter the low oil prices, sluggish cargo demand, oversupply of trade capacity and the fact that container freight rates are at historic lows.
The joint statement said: "Although growing modestly, the container shipping industry has struggled in recent years due to a decline in the container growth rate and the rapid influx of newly built vessels. These two factors have contributed to an imbalance of supply and demand which has destabilised the industry and has created an environment that is adverse to container line profitability.
"In order to combat these factors, industry participants have sought to gain scale merit through mergers and acquisitions and consequently the structure of the industry is changing through consolidation."
Evidence for that is all around with CMA CGM's acquisition Neptune Orient Lines (NOL), which owns APL; the merger of Hapag-Lloyd and UASC; and the additional merger of China Ocean Shipping (Group) and China Shipping (Group), which combined to form China Cosco Shipping Corporation (Cosco Shipping).
"K" Line's Alexandria Bridge.