NYK Line, MOL and K Line agree to merge container businesses

NYK Line, MOL and K Line agree to merge container businesses

The three biggest Japanese container carriers have agreed to merge their container shipping businesses, and terminal operating businesses everywhere apart from Japan.

In the new joint venture (JV), which is subject to regulatory approval from the authorities, Nippon Yusen Kabushiki Kaisha (NYK Line) will hold a 38% share, while Mitsui O.S.K. Lines (MOL)  and Kawasaki Kisen Kaisha Line (K Line) will own a 31% stake each.

The new JV is expected to be officially established on July 1, 2017, with service planned to start on April 1, 2018.

According to a joint statement, the companies decided to “integrate their respective container shipping on an equal footing to ensure future stable, efficient and competitive business operations” through enhanced synergy and economy of scale.

As the statement continued, the new company is expected to “realise integration effect [synergy] of approximately 110bn Japanese Yen (US$1bn) annually and seek swiftly financial performance stabilisation by taking advantage of scale merit of its vessel fleet totalling 1.4m teu”.

After the merger, the new JV is set to rank sixth in the market with a 7% share of the global throughput.

The carriers said in a statement that “the decision to cooperate in the East/West trades made in May 2016 by the creation of ‘The Alliance’” was one of the factors behind the decision to merge their container shipping businesses.

The companies added that, with most container shipping companies making a loss due to historically low container freight rates, there are limits to what they could achieve individually through cost-cutting and restructuring.

“Also, in order to keep a membership of a global alliance continuously, it would be necessary to have above a certain business scale level,” they added.

Speaking of the new company’s structure, the shipping lines said: “The parent companies will inject cash and in-kind contribution of vessels and terminal companies stocks into to the new JV in accordance with agreed share to establish an operating company to manage container shipping and container terminal (excluding Japan) business.

“The holding company will supervise the operating company as a shareholder.”