Improving the influence of Chinese shipping lines

Improving the influence of Chinese shipping lines

The shape of the next phase of container shipping alliances has become clearer in recent days after Taiwanese line Evergreen announced it was joining the CKYH alliance on the Asia-Europe trades.

This development followed news that existing alliance member Cosco had signed a cooperation agreement with fellow compatriot China Shipping.

In a joint announcement in Beijing earlier in February, the two carriers said they had signed a strategic cooperation framework agreement that would “establish a comprehensive strategic partnership and a resource sharing mechanism in areas of shipping, terminal operation, logistics, shipbuilding, ship repair”, amongst other activities.

“The agreement will help the two companies achieve advantage complementation and coordinated growth, and be better prepared for industrial changes, so as to improve the influence of Chinese shipping companies in the world shipping industry,” the statement added.

Given that both companies are state-owned, it could be argued that such an agreement was unnecessary, but hitherto they have been operated as strictly separate entities, with both having some shares listed on the Shanghai Stock Exchange. This development takes on added significance given that China Shipping has a 10-year cooperation deal with United Arab Shipping Company – one of the last top 20 carriers still operating outside an alliance.

China Shipping and UASC both have a series of 18,000teu vessels on order which, upon their delivery in 2015 and 2016 will give them  economies of scale to compete with Maersk’s Triple-E series, which is why bringing them into the revamped CKYHE alliance is so attractive, say analysts.

SeaIntel chief operating officer Alan Murphy said: “The new collaboration between COSCO and CSCL should most likely be seen as a partial step toward a potential merger. However, the agreement does not constitute merger talks, but it represents a solid step towards becoming a consolidated Chinese container carrier, if we only focus on the container units.

“Further, the CKYHE Alliance’s economy of scale would also be improved, if CSCL joins the alliance, which we believe is very likely. The question is whether UASC will also join the alliance in the future. It has been confirmed by several media sources that discussions have been ongoing between the Arabian carrier and the alliance, and we believe that both parties would benefit from a possible agreement.”

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