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          Cosco Shipping acquires OOCL

          Cosco Shipping acquires OOCL

          Latest shipping merger: Cosco Shipping acquires OOCL

          In the seemingly endless story of mergers and acquisitions in the ocean freight industry, Cosco Shipping is set to acquire OOCL. The Chinese liner confirmed a $6.3 billion bid for its OOIL, OOCL’s parent company, last week.

          “We are proud of the business we have built and the people who have been building it. This decision has been carefully considered and we believe it helps ensure the future success of OOIL. We are confident that COSCO SHIPPING Holdings is the right partner for us.” 

          – Andy Tung, Executive Director of OOIL

          COSCO Shipping Holdings and Shanghai International Port Group (SIPG) put in the offer. When completed, Cosco will hold a 90.1% stake and SIPG 9.9%. 

          The is the latest in a series of shipping M&As which the industry has witnessed over the past few years. Cosco Shipping itself is a result of a merger between China Shipping and COSCO.

          Cosco Shipping acquires OOCL: Impact

          On alliances and trade lanes

          Chinese and US government authorities, among others, still need to perform anti-trust reviews. This could take up to six months to approved. But if confirmed, the acquisition will leave Cosco Shipping with a much expanded fleet of 400 vessels. It will have a capacity of over 2.9 million TEUs when including the order book, overtaking its Ocean Alliance partner, CMA CGM (Alphaliner’s TOP 100). Its combined 11.6% market share will also exceed CMA CGM’s 11.2%.

          Following the merger, the entity will rank top on the transpacific trade, with the power to transport over 77,000 TEUs/week. That said, it will become the second-largest mover of US imports. Asia can also expect to feel a certain amount of impact as both liners have a considerable amount of presence in the area. Movement from Asia to the Middle East is also expected to increase.

          “Operationally, fitting OOCL into the bigger company should not be too difficult as both OOCL and COSCO already belong to the Ocean Alliance that operates mainly in the East-West container trades.” Drewry

          On shipping industry

          The downfall of ex-major player Hanjin Shipping last year sent shock waves around the industry. In the prolonged economic downturn, many fought to stay afloat by joining forces. This includes Japanese liners NYK, K-Line, and MOL’s merger and CMA CGM’s acquisition of APL. Drewry says given the current state of the industry’s M&As, carriers have the opportunity for profitability.

          The shipping sector is seeing fewer and fewer players as larger carriers beef up their market share. Following the merger, the top four carriers would hold 53.8% of the market share. That represents a 32% increase from just two years ago. This adds to growing shippers’ concerns of a reducing pool of options.

          Industry experts say this could spell the nearing end of major M&As. Larger carriers played their cards earlier and the industry has reached a point where getting good deals could prove difficult. The road forward, could then mean increasing competitiveness within the groupings.

          Watch out, Maersk

          According to shipping consultancy group Drewry, the COSCO-OOCL entity, when finalized, will be the world’s third largest container. That may not appear to be too much of a threat – if not for the fact that there are rumors about a possible CMA CGM takeover.

          According to Splash 247, sources tip Chinese investors as the favorites to acquire Yildirim Holding’s 24% stake in CMA CGM. Cosco sources tell the publication that Cosco Shipping is aiming to dethrone Maersk as the world’s largest containerline. If this does go through, Cosco Shipping will have a capacity of over 4.8 million TEUs. This forms a whopping 22.9% of market share, as opposed to Maersk’s current 16.4% (19.3% following its Hamburg Süd takeover).

          “There is little doubt that Cosco likely will not be done and is likely to go after more targets in the near future.”

          – Basil Karatzas, Chief Executive of Karatzas Marine Advisors

          Cosco shipping acquires OOCL infographic

          Peak Season 2021

          Dive into the factors affecting this year’s peak season and their impact, as well as the advice and tips needed to begin planning your shipment

          Peak Season 2021 eBook
          Klaus Lydsal

          "Shippers should plan as far in advance as possible. With COVID on the map and lack of space, this season will be more unpredictable than the previous one, with rates never seen"

          Klaus Lydsal, vice president of operations at iContainers