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COSCO and CSCL merger looms – again

COSCO and CSCL merger looms – again

Local Chinese media reports state that China Ocean Shipping Company (COSCO) and China Shipping Container Lines (CSCL) have been ordered, by the Chinese authorities, to develop plans towards a much expected merger in order for them to recover from the current slump in the Chinese and international markets.

Previous attempts for greater cooperation between the two shipping lines failed in 2012 and 2014; however, it is believed that this time the Chinese government appears to have lost patience with the lack of progress.

Trading of shares in both groups was suspended on Monday (10th) pending an announcement that is expected this Friday (14th), according to Alphaliner, which reported that in a statement from CSCL, the carrier had received notice from its controlling shareholder, the China Shipping Group (CSG), that the group was contemplating “certain material matters which may involve the company and which may be an inside information.”

These latest reports of the possible merger first came to light from the South China Morning Post last Friday (7th).  It is also reported that a Shanghai shipping website has said that the two groups have formed a working committee to prepare a detailed preliminary consolidation scheme, which is expected in the next three months.

China COSCO and CSCL are ranked as the sixth and seventh biggest container lines in the world respectively in terms of fleet size, with both operating on similar trade routes through different operating alliances.  By merging, the combined fleet would become the world’s fourth largest.

It is expected that a government-led merger plan will raise alarm among competition authorities globally, not least as it was China that successfully opposed the proposed alliance of the three largest shipping lines – Maersk Line, Mediterranean Shipping Company (MSC) and CMA-CGM – into the P3 Alliance last year, on the grounds that it would be “monopolistic”.