COSCO and OOCL in planned US $6.3-billion merger
Merged shipping lines COSCO and OOCL will be third largest in the world and spur further consolidation in global shipping.
The Chinese shipping giant on Monday filed papers with the Hong Kong Stock Exchange announcing its intention to buy a 90.1% majority stake in Orient Overseas Container Lines' (OOCL) parent company Orient Overseas International Limited (OOIL).
The Shanghai Port Group would buy the remaining 9.9% of shares at a 37.8% premium.
While OOCL’s shareholders appear ready to accept the deal, it still needs to clear regulatory approvals in China, the U.S. and the European Union.
If those approvals are given, COSCO-OOCL will become the third largest shipping company in the world (Maersk Line and MSC are the largest and second-largest), and the second-largest shipping line serving the United States from Asia.
The new company would control 11.6% of global container capacity, although OOCL will continue to operate as an independent brand, according to JOC.com.
The weekend announcement of the deal confirmed one of the poorest-kept secrets of the shipping industry, once more setting in motion the gears of shipping industry consolidation worldwide.
COSCO's purchase of OOCL is not just another deal, however, it should have European shipping giants Maersk and MSC worried.
"Cosco hasn’t hidden its ambition to become one of the world’s dominant carriers," writes The Wall Street Journal's Costas Paris and Joanne Chiu, while Splash 24/7 reports that the shipping line intends to eventually overcome Maersk Line as the world's largest container line.
There are reports that once the OOCL acquisition is finalised, COSCO may set its sights on acquiring French line CMA CGM, which controls 11.2% of the shipping market. That would make COSCO-OOCL-CMA CGM the largest shipping group by a huge margin.
The deal is being seen by some as the beginning of a wider shift in the shipping industry, away from a shippers' market and into a carriers' market.
If all pending deals are approved in the next year, by July 2018, 61% of world container capacity will be moved by just five ocean carriers.
Top 5 ocean carriers by capacity, (if all proposed deals are approved)
1. A.P. Moller-Maersk - 3,444,025 TEU capacity - 16.4% marketshare
2. MSC - 3,081,196 TEU capacity - 14.7% marketshare
3. COSCO Shipping - 2,421,501 TEU capacity - 11.6%
4. CMA-CGM - 2,359,493 TEU capacity - 11.2% marketshare
5. Hapag-Lloyd - 1,516,825 TEU capacity - 7.2% marketshare
SOURCE: Alphaliner TOP 100,
This, in turn, may help inflate rates for shippers and return the industry to profitability, but will have a significant impact on the freight-forwarding sector.
COSCO's purchase of OOCL highlights the new transport market shippers will face in the near future, as carriers complete their wave of consolidations.