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Three Japanese Ocean Carriers Agree to Merger

November 2, 2016

“K” Line, MOL and NYK Line have agreed to spin off their container shipping and overseas terminal operations into a joint venture company, with the start of operations slated for April 2018. The agreement was announced in a joint press conference on Monday, October 31.

Amid a pronounced downturn in the container shipping industry brought on by overcapacity and sluggish demand, the three Japanese shippers chose to take a measured, proactive approach to prevent a collapse similar to Hanjin Shipping’s, which in August became the first major carrier to declare bankruptcy in 30 years.

The structure of the as-yet-unnamed joint venture company will be formed by July 2017, with a careful integration of services expected until the April 2018 launch. The 300 billion JPY (2.86 billion USD) merger will create a fleet size of 1.4 million TEU, creating the world’s 6th largest ocean carrier, with a 7% market share. NYK will assume 38% of the shares of the new company, while “K” Line and MOL will each have 31%. According to the Journal of Commerce (JOC), the merger will not upset the carriers’ participation in the Transportation High Efficiency (THE) Alliance, which will continue as planned with a spring 2017 rollout.

“K” Line, MOL and NYK have historically been fierce competitors, but a distressed market has created an environment where stability means survival. However, the merger may turn out to be more beneficial for the three companies than simply surviving. The JOC reports that the combined companies should vault into the lead in Asian import traffic to the US, with 16.08 percent share of that movement. Currently, Evergreen Line has the largest share at 11 percent. This solid market footing, combined with expected efficiencies gained with cost savings and shared resources, should place the joint venture in a strong position to withstand the current overcapacity situation, which is expected to last through 2018.

Read More:
Journal of Commerce
Joint Press Release

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