Lunes 22 de Octubre del 2018

A merged Cosco-OOCL would be No. 2 carrier serving US

Cosco would significantly strengthen its position in trades to and from the United States with an OOCL acquisition.

Rumors surrounding a Cosco-OOCL tie-up refuse to go away despite repeated denials by both carriers. However, if the price was right and the China and Hong Kong lines did come together, a formidable new global entity with the third-largest mega-ship fleet and the second-largest mover of US containerized goods would be created.

Based on US container volume in 2016, a merged line would give Mediterranean Shipping Co. fiercer competition for market share by handling 9.9 percent of all of US exports and imports. MSC controlled 11.9 percent of volume last year, while third-place Maersk Line handled 9.4 percent of volume, according to an analysis of PIERS, a sister product of within IHS Markit. Cosco and OOCL were the sixth-and seventh-largest movers of US containerized cargo, respectively, in 2016, with 5.26 percent and 4.65 percent shares.

In terms of shares of US imports in 2016, OOCL ranked No. 9 (4.5 percent) and Cosco No. 6 (6.3 percent) as the former’s volume rocketed 30.2 percent year-over-year and the latter’s volume jumped 14.6 percent. A merged carrier would be the second-largest mover of US container imports, with a share of 10.8 percent share, according to PIERS.

OOCL ranked No. 6 (5 percent) among carriers moving US exports in 2016, while Cosco ranked No. 11 (3.5 percent). OOCL’s volume of US exports rose 16.9 percent, and Cosco’s volume jumped 39.8 percent year-over-year last year. A merged carrier would have been the third-largest mover of US exports, with a share of 8.5 percent, last year.

Cosco has 49 vessels with capacities of more than 10,000 TEU, while OOCL has 15 such ships, potentially resulting in a merged fleet of 64 mega-ships, according to the IHS Markit orderbook. MSC has the largest mega-ship fleet with 85 such vessels followed by Maersk with 72 mega-ships. The ranking could change as more carriers receive mega-ships.

Long-running speculation that Cosco would announce its plan to acquire OOCL from Orient Overseas (International) Ltd. (OOIL) on July 1 — to mark the 20-year anniversary of the United Kingdom handing over Hong Kong to China — mounted after Cosco Shipping Holdings temporarily suspended trading of its stock May 17. The mainland's major carrier said in an exchange filing that the share suspension was because of "material asset restructuring," but it did not explain further.

Citing unnamed sources familiar the matter, The Wall Street Journal said the merger could close as early as July for at least $4 billion. One source told the WSJ that the Tung family is “warming” up to the sale of OOCL, which traces its roots to Shanghai in the 1940s, when C.Y. Tung set up Chinese Maritime Trust Ltd.

There has been huge asset relocation within Cosco Shipping since Cosco and China Shipping brought their operations under one umbrella on Feb. 18, 2016; a continuation of this could be the reason behind the halt in stock trading. At the time of the merger the shipping lines had huge fleets of container ships, dry bulkers, tankers, and chemical vessels, with terminals around the world and significant logistics operations.


The new liner company falls under Cosco Shipping Holdings, which has plans to boost its fleet by at least 50,000 TEU to more than 2 million TEU by year-end 2018, making the container line the world’s third-largest and displacing CMA CGM.

The acquisition of OOCL by Cosco for roughly $4 billion would be “a very, very competitive price” for a prized and well-run carrier as the industry strengthens, Drewry Financial Research Services (DFRS) wrote in a note. Cosco would improve its yield over the next several years, resulting in stronger earnings, wrote Rahul Kapoor, director at DFRS.

“As the industry is witnessing a strong upturn, and valuations have risen materially, both the time and price is right, in our view,” he wrote.

Cosco Shipping bounced back from its $1.4 billion 2016 loss with a profit of $39 million in the first quarter, driven by its container division, which reported surging volumes and a solid increase in revenue. Cargo volume at Cosco, which operates a fleet of 327 container ships, shot up 54 percent compared with the first three months of last year, with the liner unit carrying 4.65 million TEU.

OOCL reported a $273 million loss in 2016 as weak freight rates dragged down the average revenue per TEU by almost 19 percent to just $774 per container. Although it did not disclose earnings for the first quarter, Cosco on April 28 reported volume rose 7 percent-year-over-year, while revenue increased 6.4 percent, to $1.18 billion. Overall revenue per TEU, however, slipped 0.6 percent from first-quarter 2016.

The wave of mergers and acquisitions in the past 18 months are a result of carriers’ drive for scale to lower unit costs amid intense competition between the alliances — 2M-plus HMM, (Maersk, MSC, and Hyundai Merchant Marine); Ocean (CMA CGM, Evergreen, OOCL, and Cosco); and THE (Yang Ming, MOL, NYK, “K” Line, and Hapag-Lloyd). This has placed the smaller carriers under pressure, with transport analysts convinced that to survive in such a size-dominated market, OOCL, Yang Ming, and Zim Integrated Shipping Services will have to be acquired by a larger rival at some point.

Fuente: JOC

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