MOL, NYK, K-Line Set Aside Century Old Rivalry to Merge

MOL

Japan’s big three shipping groups – K-Line, MOL, and NYK – have made public that they will be integrating their businesses in the near future, setting aside a century old rivalry to survive in tough market conditions. If the merger is approved by regulators, the three container lines will establish a joint venture by July 2017 and commence joint services by April 2018.

MOL, NYK, and K-Line are currently ranked No. 11, No. 12, and No. 15 respectively by Alphaliner in terms of capacity deployed. After the merger, their container vessel fleet capacity would be approximately 1.4 million TEU, making it the sixth largest shipping line in the world with around 7% market share. Together, they would own approximately 256 vessels.

Unfavorable market conditions led to the decision to merge. A joint statement issued by the three lines reiterated what has now become common knowledge in the industry: only with economies of scale can shipping lines cut costs effectively and compete with larger container lines that dominate the trade. For the first half of the fiscal year ending March 31, 2017, NYK and K-Line reported net losses of billions.

This is the latest in a trend of mergers and consolidations in the container shipping industry. Hapag-Lloyd will merge with the UAE’s United Arab Shipping Company. France’s CMA CGM has recently completed the acquisition of Neptune Orient Lines, which owns APL. Two major container shipping lines in China merged earlier this to year to create China COSCO Shipping.

According to a PIERS analysis reported by the Journal of Commerce, the newly merged Japanese lines would be the dominant mover of cargo from Asia to the U.S. if they started joint operations today.

There’s much debate over how this will affect prices and the industry as whole. AGWorld will continue to keep you updated on new developments relevant to this issue, giving you the context you need to make informed decisions that align with your business strategy.

Photo courtesy of Matthew Simantov

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