China’s two logistics and shipping giants Cosco Group and China Shipping Group have reportedly been ordered by the government to merge as Beijing intensifies its campaign to streamline state-owned enterprises (SOEs).
The South China Morning Post reports that Beijing last week instructed the two state companies to produce a merger plan.
Speculators believe either the two companies will be united or some of their operations will be combined. Unifying the two companies, however, would be easier said than done.
For one, their box fleets China Cosco and China Shipping Container Lines (CSCL)—ranked as the world’s sixth and seventh largest, respectively, by fleet size—belong to different shipping alliances.
China Cosco is part of the CKYHE alliance, while CSCL has a partnership with CMA CGM and United Arab Shipping Company.
For another, the merger proposal will have to go through antitrust review by global regulatory authorities.
Moreover, for the merger to happen, there will have to be consolidation of the various companies owned by the two groups.
But reports say the merger will have to be realized at some point, particularly their box shipping divisions Cosco and CSCL, as the global maritime industry continues to struggle to eke out a profit and the government shows strong determination to trim the bulky SOE sector.
If this pushes through, the combined container fleets would propel them to become the world’s fourth biggest box line controlling about 8% of global capacity. This will also increase their presence on key Asia-Europe trades but reduce their share of the pie on other trades.
Photo: Rgaudin
