Japanese Shipping Companies to Merge Container Operations

Japanese shipping companies NYK, Mitsui OSK Lines (MOL) and Kawasaki Kisen Kaisha (K-Line) said on Monday they will merge container shipping operations as overcapacity and weak economic growth shake up the global industry.

The companies will form a joint venture that they expect will see an annual cost benefits of about 110 billion yen ($1.05 billion).

They said in a statement that have decided to integrate their respective container shipping on an equal footing to ensure future stable, efficient and competitive business operations.

The new joint-venture company is expected to create a synergy effect by utilizing the best practices of the three companies and will take advantage of scale through its combined fleet of 1.4 million TEUs.

The merger will make the group the sixth largest carrier in the world with aproximately seven percent of global capacity, according to estimates from Alphaliner.

Shares in the companies - whose combined fleet of over 2,000 vessels includes tankers, dry-cargo carriers and container ships - jumped almost 10 percent after news that their presidents would hold a news conference at 0200 GMT.

Overcapacity and poor economic growth globally has left hundreds of ships idle in the industry's worst downturn since its origins in the 1950s and 1960s, causing the collapse in August of South Korea's Hanjin Shipping, then the world's seventh-largest container shipping company. Analysts expect capacity to worsen at least over the next three years.

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

The Japanese joint venture, to be owned 38 percent by NYK and 31 percent each by MOL and K-Line, will be formed on July 1, 2017, and begin operations in April 2018, they said in a joint statement.

Shares of NYK rose as much as 9.9 percent, MOL by 9.2 percent and K-Line as much as 8.5 percent.

The three firms are due to report their earnings on Monday as yen strength threatens to widen their annual loss forecasts.

VesselsValue data on container shipping company’s non-chartered fleet values:

New top 10 ranking of container fleets

Aside from Moller Maersk, who has taken back the top spot after the China Cosco Shipping Corp merger, spots 2-5 are now taken up by container companies who have merged or bought out other companies.

The top three alliances now own 45 percent of the entire world container fleet, showing a huge appetite from the largest container companies to merge.