Cosco Container Lines and China Shipping Container Lines are looking to expand their vessel-sharing agreements on China coastal and intra-Asia trade lanes to other routes, said Capt. Wei Jiafu, chairman of the Cosco Group
The two Chinese carriers are discussing the possibility of extending their cooperation to the trans-Pacific and the Asia-Europe trades, Wei said in an interview on the eve of the 12th annual Journal of Commerce Trans-Pacific Maritime Conference in Long Beach.
“China Shipping and Cosco are both Chinese companies, so why not shake hands,” Wei said. “We shake hands with Hanjin and ”K” Line and Yang Ming in the CKYH alliance so why not shake hands with China Shipping? We are brothers.”
He said the closer cooperation between China’s two major container lines had come about because of changes in top management. Wei said the president of China Shipping, Xu Lirong, had been Cosco’s vice president and the new president of Cosco, Ma Zehua, is a former vice president of China Shipping.
Wei, the keynote speaker at the opening day of the TPM Conference, said the losses reported by most major carriers last year means carriers need to start cooperating more with each other and with their shipper customers to avoid future losses and stabilize freight rates. “Both sides need to collaborate on reasonable freight rates for long-term strategic reasons,” he said.
Cosco has started negotiating multiyear contracts of up to 10 years with Chinese importers and exporters that provide what he called a “small” profit margin for the carrier. If carriers continue to “bleed” red ink as they did last year, some small and medium-sized carriers will either go out of business or be acquired by other lines, he said.
"Some mergers could occur as soon as this year," Wei said. "Some banks will push them to get together."
Cosco is increasing the volume of cargo it transports to the Midwest through the Canadian Port of Prince Rupert in British Columbia because of the low intermodal rates charges by Canadian National Railway.
“The costs through Prince Rupert are much lower than through U.S. East Coast ports, and the railway costs are much higher through U.S. West Coasts ports,” he said. “A shipping company has no other choice. It is always looking for lower costs.”