Drewry gives Cosco’s takeover of OOIL its unqualified blessing

Drewry gives Cosco's takeover of OOIL its unqualified blessing

THE takeover of Hong Kong's Orient Overseas (International) Limited, and its container unit, Orient Overseas Container Line, by China's Cosco organisation received the blessing of analysts at London's Drewry's Maritime Research.

13 July 2017 - 20:00 - Update: 14 July 2017 - 09:47

Drewry said OOCL had a good track record for above-average profits in a challenging market and a reputation for being a very well-run company.

From a hardware perspective, OOCL has an owned-fleet of 66 containerships aggregating 440,000 TEU with an average age of 7.1 years and average nominal capacity of 6,600 TEU. It is introducing its first 21,000 TEU vessel with five more to deliver and options for another six.

Based on existing fleet and orderbooks the combined Cosco-OOCL entity would become the world's third largest container carrier, overtaking its partner in the Ocean Alliance, CMA CGM.

Cosco itself has a large orderbook, including newbuilds inherited from last year's merger with China Shipping Container Lines.

"As such, it will have little requirement to order any more new ships in an already over-supplied market," said Drewry.

OOIL/OOCL has interests in four terminals: 100 per cent owned facilities in Long Beach in the US and Kaohsiung, Taiwan, and minority stakes (20 per cent) in two Chinese terminals (Tianjin and Ningbo).

"Operationally, fitting OOCL into the bigger company should not be difficult as both OOCL and Cosco already belong to the Ocean Alliance (alongside CMA CGM and Evergreen) that operates mainly in the east-west container trades. OOCL is not a major player in the north-south trade lanes that fall outside of the scope of the carrier group," Drewry said.

"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."

As far as terminal ownership is concerned, in Ningbo, Cosco is also a shareholder in the same terminal as OOCL so this is a simple consolidation. In Tianjin, 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.

OOCL's Long Beach operation is undergoing a very large re-development that will see the existing one-berth Long Beach Container Terminal at Pier F closed and the three-berth Middle Harbour Redevelopment Project (MHRP) replace it. Phase I of MHRP went live in April 2016 and has since been in full operation. Phase II is expected to be operational at the end of 2017.

Cosco already has two terminals in LA/LB so this will be a third and by 2020 these three terminals will account for 30 per cent of the capacity of LA/LB.

In Kaohsiung, Cosco has a stake in one terminal along with China Merchants, Yang Ming, NYK and Ports America.

Cosco Shipping Ports (CSP) is reportedly acquiring a 15 per cent stake in SIPG from Shanghai Tongsheng Investment and this would make CSP the third largest shareholder in SIPG.

"This is further evidence of the agglomeration of the Chinese state-owned enterprises involved in the port sector. SIPG's involvement in the OOCL deal is therefore not a left-field move but very much further evidence of the consolidation and intertwining of Chinese-owned port sector activity," said Drewry.




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