Cosco acquisition sign of Chinese “consolidation”
The acquisition of Orient Overseas Container Line (OOCL) by Chinese state-owned Cosco and Shanghai International Port Group (SIPG) signifies the agglomeration of the Chinese state-owned enterprises involved in the port sector, an analyst has said.
On the completion of the deal, Cosco will hold 90.1% while SIPG will hold the remaining 9.9% stake in OOIL.
Cosco Shipping Ports (CSP) is reportedly acquiring a 15% stake in SIPG from Shanghai Tongsheng Investment, meaning CSP would become the third largest shareholder in SIPG, Neil Davidson, senior analyst – ports and terminals at Drewry, stated.
He said: “SIPG’s involvement in the OOCL deal is very much further evidence of the consolidation and intertwining of Chinese-owned port sector activity.”
OOCL has interests in four terminals: 100% owned facilities in the Port of Long Beach in California, US and Kaohsiung, Taiwan, and minority stakes (20%) in two Chinese terminals (Tianjin and Ningbo).
“In Ningbo, China Cosco is also a shareholder in the same terminal as OOCL and so this is a simple consolidation,” Mr Davidson added. “In Tianjin, China Cosco already has stakes in two terminals, neither of which are the same as the terminal in which OOCL has a stake, and so some ownership consolidation may take place here. This may involve China Cosco taking an interest at the port authority level of ownership, as it has done in, for example, Qingdao.
“OOCL is not a major player in the North-South tradelanes that fall outside of the scope of the carrier group. The biggest impact will be felt in Intra-Asia, where both carriers already have a large presence, while the footprint in the Asia to Middle East trade will also rise significantly.”
In Kaohsiung, China Cosco has a stake in one terminal, along with China Merchants, Yang Ming, NYK and Ports America, but not OOCL, which invests in a different terminal.
The Port of Long Beach, currently undergoing a very large re-development, stated that Cosco and OOCL represented 22.6% of its container business in calendar year 2016; Cosco at 1,005,603TEUs (14.84%) and OOCL at 524,073TEUs (7.74%).
OOCL’s lease at Long Beach Container Terminal expires in June 2051. COSCO’s lease at Pacific Container Terminal expires in April 2022.
Port of Long Beach executive director, Mario Cordero, said: “COSCO and OOCL are two of our most valued customers. The Port of Long Beach is ready to support their efforts to enhance operating efficiencies and achieve sustainable growth. We will await further specifics to the terms and the impacts of the merger. We are committed providing the best services in the country not only to COSCO and OOCL, but to all of our many partners.”
Mr Davidson observed: “Cosco and OOCL are in the same liner alliance, and so the deal is unlikely to be disruptive in terms of ports of call by the Ocean Alliance. That said, no doubt Cosco will review all of the terminal handling contracts and deals that OOCL has with ports and terminals around the world, and seek to leverage the newly combined activity of Cosco and OOCL in each case.”
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