A CHINA Cosco-CSCL merger makes financial sense, but
would have huge implications for competition in the container shipping
industry, according to Drewry Maritime Research.
If a merger
did happen, Drewry said it expects it would have a domino effect on the
existing alliance structure of the container shipping industry and
could see other Asian countries follow China's lead.
The London
research house expects Japanese and Taiwanese carriers to seek consolidation of
their national carriers, strategies that could undermine competition in the
sector.
The two
Chinese state-owned giants, the world's sixth and seventh biggest container
lines, saw shares in their listed units suspended recently as reports that they
were in talks over a possible merger.
A combined
Cosco-CSCL entity would be the world's fourth largest container shipping
company and generate huge financial efficiencies - the two carriers have
racked up $911 million in operating losses (EBIT) from container
operations over the last five years.
"The
rationale for a merger is entirely sound from a financial viewpoint and calls
into question why China has persisted with the two-carrier strategy for so
long," said Drewry. "It makes little sense to have two national
carriers competing fiercely against one another and against non-Chinese
carriers in the same markets."
"There
is a hint of double-standards about this story as it was Chinese competition
regulators that blocked the proposed P3 alliance between the world's three largest
carriers Maersk Line, MSC and CMA CGM in 2014," added Drewry. "It
seems now that China is happy for the number of major carriers to shrink by
one.
"Operational
alliances, which arguably maintain competition and help reduce costs, are the
subject of misdirected criticism by some regulators and some shipper groups. A
more serious competition risk - the reduction in the number of carrier
competitors - seems to be encouraged by governments."
Source :
HKSG.
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