EnThe takeover of Orient Overseas by COSCO Shipping has received approval from China’s National Development and Reform Council, one of the few remaining conditions for the deal. The deal is far from complete though as the company is still awaiting CFIUS approval in the U.S., which is hung up on its ownership of port assets as Long Beach, as outlined in Panjiva research of April 23.
A key question is whether the deal, which has been largely passed without conditions so far, will lead to a change in behavior from the newly integrated shipper. So far both COSCO and Orient Overseas have been highly aggressive in building up their market share since the merger was announced in July 2017.
Taking the Transpacific and Transatlantic businesses as an example, via U.S. inbound seaborne shipments, Panjiva data shows COSCO Shippings volumes into all ports rose 13.6% in the three months to April 30 on a year earlier, while Orient Overseas surged 24.4% higher.
Source: Panjiva
The combined entity’s most significant routes into the U.S. in terms of combined volumes are from the five largest Chinese ports which together account for 52.3% of total volumes in the 12 months to April 30. That’s followed by the Prince Rupert to Los Angeles leg of its Transpacific services at 5.4%. Such a high degree of independence on a handful of lanes increases the combined shippers’ exposure to economic and geopolitical risks and may need to be reviewed.
Source: Panjiva
This could be handled by reducing market share on two ports specifically where the shippers may be unnecessarily competing with each other. The two are have their highest market shares of ports’ outbound traffic to the U.S. in Yantian (14.2% COSCO and 14.3% Orient Overseas in the past 12 months) and Shanghai (21.6% COSCO, 12.6% Orient Overseas).
Source: Panjiva
