[011116.EN.SEA] 'K' Line, MOL, NYK To Merge Box Operations, But Not Till April 1, 2018

THE Big Three Japanese shipping companies - "K" Line, MOL and NYK - have agreed to spin off their container shipping business into a JPY300 billion (US$2.86 billion) joint venture company that does not plan to open until April 1, 2018.

The as yet unnamed joint venture company to be established July 1, 2017, will be 38 per cent owned by NYK and 31 per cent each by MOL and "K" Line. It will then create a container fleet of 1.4 million TEU, generating estimated revenues of JPY110 billion a year.

The companies, Kawasaki Kisen Kaisha, Mitsui OSK Lines and Nippon Yusen Kabushiki Kaisha, have agreed, subject to regulatory approval, to include their worldwide terminal operation outside of Japan in the JV and to sign a business integration contract and a shareholders agreement.

The joint statement explained that the container shipping industry had struggled in recent years due to a decline in the container growth rate and the rapid influx on newly built vessels.

"These two factors have contributed to an imbalance of supply and demand which has destablised the industry and have created an environment that is adverse to container line profitability," the statement said.

To combat these factors, said the joint statement, shipping companies have sought economies of scale through merger.

"Under these circumstances, three companies have now decided to integrate their three respective container shipping on an equal footing to ensure a future stable, efficient and competitive business operations.

"This new joint venture company is expected to create a synergy effect by utilising the best practices of the three companies.

"By strengthening the global organisation and enhancing the liner network, the new joint venture company aims to provide higher quality and more competitive services in order to exceed our clients expectations," the joint statement said.

Source : HKSG.