Ocean Network clears last regulatory hurdle

Ocean Network clears last regulatory hurdle

South Africa has approved ONE's joint venture. Photo credit: ONE.

South Africa’s competition watchdog this week gave the green light to the Ocean Network Express (ONE) merger of Japan’s three top container shipping lines, clearing the way for the new joint venture (JV) carrier to launch its global operations on April 1.

NYK Line, MOL Line, and “K” Line will operate under the ONE name as part of THE Alliance with members Hapag-Lloyd and Yang Ming. Apart from the three companies' container shipping businesses, also included in the integration are their terminal operations outside Japan.

Jeremy Nixon, the former head of container shipping at NYK, will lead ONE as chief executive based in the carrier’s operational headquarters in Singapore. NYK has a 38 percent share in the JV company, while MOL and “K” Line have 31 percent each.

The Competition Tribunal of South Africa initially opposed the merger, but its concerns centred around the car transportation divisions operated by the carriers that have in the past been the subject of anti-trust investigations. While giving its approval, the regulator attached conditions aimed at ensuring no collusion occurred between the car transport and bulk shipping businesses.

“The conditions approved by the tribunal address concerns pertaining to the exchange of competitively sensitive information and cross directorships in the adjacent car carrier shipping and bulk shipping businesses between the parties,” the tribunal said in its ruling.

The tribunal added that while the Japanese carriers had disputed the need for conditions, they indicated that in the interests of gaining approval for the merger they would agree to be bound by the restrictions.

The three Japanese carriers officially established the world’s sixth-largest liner shipping company on July 7, 2017. ONE has the world’s sixth-largest fleet that, according to Alphaliner data, grew by 8.7 percent in 2017 to a capacity of 1.48 million TEU. This will be boosted by the deliveries in 2018 of one 20,180 TEU unit from MOL, four 14,020 TEU vessels from NYK, and five 13,870 TEU ships from “K” Line.

Merging their container shipping divisions will generate the scale and cost benefits that are essential to be competitive against the industry giants such as Maersk Line, Mediterranean Shipping Company, CMA CGM, and the Cosco Shipping-Orient Overseas (International) Ltd.

With ONE now all set for launch, Cosco-OOIL is the only mega-merger still outstanding in the wave of consolidation that has swamped the industry. Cosco paid a handsome $6.3 billion for OOIL and its liner division, OOCL, in 2017 but it remains unclear when the acquisition process will be completed.

The European Commission gave its green light for the Cosco takeover late last year, following a tacit approval by US regulators in October 2017 when they allowed the objection period to pass. Cosco shareholders also agreed to the acquisition in October after it was cleared by China’s State-owned Assets Supervision and Administration Commission of the State Council. Cosco will hold 90.1 percent of OOIL and Shanghai International Port Group will hold 9.9 percent.

The joint capacity controlled by Cosco-OOIL at the end of 2017 was 2.48 million TEU. Alphaliner said Cosco Shipping grew its capacity by 11 percent in 2017 as 71,300 TEU of newbuilding deliveries came online, additional tonnage from the charter market was taken on, and the carrier recovered ships previously chartered out to partners.

OOCL’s average capacity rose 19.7 percent in 2017 from 576,000 TEU in January last year to 689,000 TEU by December, with the increase coming mainly from the delivery of five 21,400 TEU mega-ships. The sixth and last of its giant G-class container ships was delivered earlier this month.

Contact Greg Knowler at greg.knowler@ihsmarkit.com and follow him on Twitter: @greg_knowler.