[111111.EN.SEA] MOL Boss Sees Japan Big 3 Merger As Way To Survive In Asia-Europe Trade

KOICHI MUTO, president of Mitsui OSK Line (MOL), sees the merger of Japan's big three container lines as a way to survive in the Asia-Europe trade, given the need of economies of scale to gain market share and access financing.

Reflecting Maersk's view that only the biggest operators can survive in the future Asia-Europe trade, Mr Muto said: "To go on one route needs 10 ships. That's about US$1.5 billion to deploy on one route. We can't afford that."

Even if the three Japanese carriers merged, they would still only be half the size of Denmark's Maersk Line by container volume and account for 7.5 per cent of the world container market, compared to Maersk's 15.7 per cent, MSC's 13 per cent, CMA CGM's 8.6 per cent, Cosco's 4.1 per cent and Hapag-Lloyd's four per cent to cite the top five.

Mr Muto said merger "could be an option. At the moment there is no such discussion, but MOL had "studied such a possibility", reported London's International Freighting Weekly.

Since all three Japanese carriers are expected to sustain big losses in container operations this year, Mr Muto said merger would help meet the financial challenges ahead.

MOL is expected to lose US$51 million this year, and "K" Line is set to lose some $384 million this year. NYK expects a full operating loss of $131 million and a $280 million loss on recurring operations.

There is one problem, Mr Muto said, and that is the service alliances between NYK and MOL. "Now we are all alliance with partners, and the timing is a very different matter."

Moreover, NYK has chartered four mega ships from its alliance partner Hong Kong's Orient Oversees International Lines (OOIL), while MOL has chartered five from another partner, Singapore's Neptune Orient Lines.

But Macquarie Bank analyst Janet Lewis in Hong Kong said that the obstacle is temporary because OOIL and NOL "will want those ships back to stay in the Asia to Europe trades".

Ms Lewis said a more powerful "Japan Lines" would enhance competitiveness against Maersk, MSC and CMA CGM, the world's big three carriers that control 37.3 per cent of trades.

Source : HKSG, 11.11.11.