China’s shipping conglomerates China Merchants Energy Shipping (CMES) and Sinotrans & CSC Group are going to merge their operations as part of the Chinese government’s plan to reform its state-run shipping sector.
The information has been disclosed by local media, citing sources familiar with the matter from the two companies and SASAC Enterprise Reform Bureau. As informed, the integration of business operations was ordered by the government on September 2nd.
The two shipping companies have already started to consolidate their operations by setting up a joint venture in 2014, China VLCC, intended for operation of supertankers.
The announcement comes in anticipation of a merger between two other Chinese shipping majors, China Ocean Shipping Group (Cosco) and China Shipping Group, within efforts to consolidate state owned enterprises and curb losses stemming from overcapacity in the market.
Namely, the government of China has reportedly ordered the merger of two of the country’s largest state-owned shipping companies at the beginning of August. Following the announcement, both companies and their respective subsidiaries suspended trading from stock exchanges in anticipation of a “major announcement.”
However, the merger, should it move forward, is likely to cause a domino effect on existing carrier alliances and further carrier mergers in Asia, damaging industry competition, according to consultancy firm Drewry.
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