Japanese merger another indication of trouble for container industry

Posted by PortVision

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The creation of Japan's second largest box carrier was announced in October. As reported by Bloomberg, the new firm includes Japan's three largest shippers which will be combining their container operations.

All predicting losses this year, the new company is comprised of Nippon Yusen KK, Mitsui O.S.K. Lines Ltd. and Kawasaki Kisen Kaisha Ltd. Together, they control seven percent of the world's container trade. Approval for this move will come from regulators in the EU, the US, China and Japan with a target date of July 1, 2017 for the merger and April 2018 for joint operations to begin.

China Cosco Shipping Corporation is Asia's largest container carrier. The newly formed Japanese firm, which will be second, predicts $19 billion in sales. The company will have 256 ships and each of the three firms will hold about one-third of the new operation with Nippon Yusen the majority owner.

This potential consolidation ends a year of global stress in ocean cargo shipping due to the challenges of industry oversupply, low freight rates, and a softening global economy. Hanjin Shipping Company, South Korea's largest shipping firm, filed for bankruptcy protection in August. Recently Maersk announced plans to acquire existing vessels and companies, rather than ordering any newly built ships. In December Maersk reached an agreement to acquire the container shipping line Hamburg Süd.

In November, the merger of Hapag-Lloyd and UASC was approved. The new company will hold the rank of the world's fifth largest container shipping line with a worth of $8 billion. The efficiencies that can be gained through these mergers and changes in business plans are routes that are becoming more and more common in an unsure economic environment.

South Korea's government announced a plan in October to spend $9.6 billion in the next four years to support their shipping and shipbuilding industries due to the weak markets and falling orders for new ships. South Korea currently boasts the world's three biggest shipbuilders. The assistance will include orders for 250+ vessels plus financing support.

Hyundai Heavy Industries Company (the world's biggest shipbuilder) plans to spin off all of its non-shipbuilding businesses. Daewoo Shipbuilding & Marine Engineering Company (the world's second biggest shipbuilder) will be cutting 5,500 jobs by 2018. Just in 2016, the South Korean shipbuilding industry has lost 20,000 jobs and more jobs may be eliminated in the near future, according to a Bloomberg article.

gCaptain reported that Rickmers Maritime, a Singapore shipping trust, has sold the India Rickmers (previously called the Hanjin Newport) for scrap. It is the youngest containership ever sold for this purpose, having been built in 2009. It was sold to partially repay a debt to Commerzbank. The scrap value of the vessel is estimated at $5.87 million.

It appears that we may see many more of these moves by container shipping lines and the associated industry in hopes of counteracting the weak shipping environment.

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Posted on Dec 22, 2016 6:07:00 AM

Topics: Container, Shipping