Japan’s top three shippers to merge container operations

Japan’s top three shippers to merge container operations
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Story Dated : October 31, 2016

Tokyo: Japan’s top three shippers on Monday said they will integrate their container shipping operations to create the world’s sixth-largest player, joining a growing trend of consolidation in an industry battling its worst-ever downturn.

Overcapacity and anaemic economic growth globally have left hundreds of ships idle in the industry’s worst slump since its birth in the 1950s and 1960s, which culminated in the collapse in August of South Korea’s Hanjin Shipping Co Ltd.

Nippon Yusen KK, Mitsui OSK Lines Ltd and Kawasaki Kisen Kaisha Ltd said they would form a joint venture that they expect to create annual cost benefits of about 110 billion yen ($1.05 billion).

“The aim of becoming one this time is so none of us become zero,” said Tadaaki Naito, the president of Nippon Yusen, at a joint news conference in Tokyo.

Container shipping has seen a wave of mergers and acquisitions as companies try to grab a bigger share of a depressed market.

“This merger … is a response to consolidation in Europe that is creating mega carriers. It is necessary to stay competitive,” said Eizo Murakai, Kawasaki Kisen’s president.

The Japanese joint venture, to be owned 38 percent by Nippon Yusen and 31 percent each by Mitsui OSK and Kawasaki Kisen, will be formed on July 1, 2017 and begin operations in April 2018, they said in a joint statement.

Shares in the companies – whose combined fleet of over 2,000 vessels includes tankers, dry-cargo carriers and container ships – jumped almost 10 percent.

Nippon Yusen rose as much as 9.9 percent, Mitsui OSK by 9.2 percent and Kawasaki Kisen as much as 8.5 percent.