Reports: COSCO and China Shipping in merger talks

Shares in two Chinese liner shipping companies suspended; a merger could create fourth largest container carrier.

   Trading in the stocks of COSCO and China Shipping Container Lines were suspended Monday amid reports that the two companies are discussing a possible merger.
   Little information was available about the proposal on the websites of the two companies, but a report by Beijing-based Caixin Media said an executive at COSCO told it that the central government has “urged the two companies to draft a preliminary merger plan within three months starting from August” and that a five member working group will be set up to discuss the merger plan.
   The South China Morning Post said “Beijing on Thursday night ordered the two beleaguered state behemoths struggling in a protracted industry slump to come up with a roadmap to merge.”
   Alphaliner lists COSCO as the sixth largest liner company with an owned and chartered fleet with capacity of 866,260 TEUs and China Shipping as having capacity of 699,606 TEUs. Combined with 1,565,866 TEUs, they would become the fourth largest container carrier, behind Maersk, Mediterranean Shipping Co., and CMA CGM, but ahead of Hapag-Lloyd and Evergreen Line.
   A combination of the two companies would be complex and affect others carriers: China Shipping is a member of the Ocean Three alliance with CMA CGM and United Arab Shipping Co., and COSCO is a member of the CKYHE Alliance with “K” Line, Yang Ming, Hanjin, and Evergreen.
   An article in China’s People’s Daily said Chinese stocks rose the most in a month “as the South China Morning Post citing inside sources said that State Council has approved long-awaited SOEs reform to put a greater distance between government and their day-to-day commercial operations.”
   People’s Daily added “The shake-up will include setting up two new Temasek-style sets of companies that will channel funds to SOEs and pressure them to turn a profit, said the newspaper on Saturday. Temasek is Singapore’s sovereign fund investment company with a broad portfolio.”
   Ironically, there have been reports in recent weeks that Temasek, the major shareholder of Neptune Orient Line and its container carrier subsidiary APL, might be looking to shed its investment in the shipping company.