Three of Japan’s largest shipping lines announced they would merge their container shipping operations to create a company that will control 7 percent of the global container-shipping trade, according to a joint statement.
Nippon Yusen KK, Mitsui O.S.K. Lines Ltd., and Kawasaki Kisen Kaisha Ltd. decided to join this trend in the shipping industry in order to face a 2017 year full of critical predictions and avoid a potential bankruptcy situation, like Hanjin’s current landscape.
“With joint shipping and alliances, the scale of our operations and business styles, we have many things in common,” the shipping lines said in a joint statement. “We thought it would be easier to utilize each others’ strengths this way.”
The combined entity will be the world’s sixth-largest player with about 2 trillion yen ($19 billion) in sales and expects to start operations by April 2018 with 256 vessels, according to the statement.
“The way the industry is going, combining their operations is a good thing,” said Rahul Kapoor, a director at Drewry Financial Research Services Ltd. in Singapore. “China has combined its two shipping lines. The Japanese need to combine to survive in this environment.”
Greg Knowler, and maritime and trade expert at HIS Markit, said the news are not a surprise for the industry since the three shipping lines reported losses recently:
“The decision by the three Japanese carriers to merge their container shipping businesses does not come as a complete surprise as these carrier lines have reported huge losses in some of the past few quarters,” said Knowler.
According to Bloomberg, on Monday these three companies shared their predictions for next year, revealing a forecast of operating losses: Nippon Yusen expects a loss of 25.5 billion yen, Kawasaki Kisen 44 billion yen and Mitsui OSK 15 billion yen.
The Japanese merger will be the largest container shipping company after China Cosco Shipping Corp.