Are Super Logisitics Mergers in China On the Way?

Thursday, September 27, 2007 8:21

China taxWhile recently looking further into the Yangtze, recent container traffic patterns, and the companies operating on the Yangtze we have been able to see that there is something on the horizon… something in the planning among the big 5 state owned shipping companies (COSCO、China Shipping、China Changjiang Shipping, Sinotrans, and China Merchant Shipping).

These big five central companies have all develop their own specialties and market very well.COSCO, China Shipping, China Merchants and Changjiang are all heavy hitters in the shipping area with COSCO and CSL primarily export shippers and China Merchants and Changjiang primarily river shipping. Sinotrans however has carved out their niche not in shipping, but in freight forwarding, an area closely aligned with all four of the shippers.

Where this gets interesting is that China is in desperate need to begin privatizing its state assets, and with nearly 20% of GDP going to logistics, there is clearly ways to find efficiencies… and there are some interesting possibilities for very large mergers to take place.

First possibility is that: China Changjiang Shipping merges with Sinotrans. The international freight forwarding business of Sinotrans and river shipping business of China Changjiang Shipping would become a very interesting play. Changjiang owns a large part of all the containers moved up and down the Yangtze, and marrying it to a freight forwarder could lead to some things for the Yangtze river traffic itself.

The second possibility is that: China Shipping merges with China Changjiang Shipping and COSCO merges with Sinotrans. Were this to happen the CSL/ Changjiang group would become one of the largest (if not the largest)water operators in the world. this would definately lead to improved Yangtze container traffic, which would in turn lead to investment moving up the Yangtze. The COSCO and Sinotrans merger would bring together the largest shipper with the strongest freight forwarder, and thus china would have 2 super sized water based logistics companies that would look to rival groups like Maersk and APL.

Of course, these possibilities would no doubt bring about a certain level of chaos into the system once transacted, however the chum is in the water. China has invested billions into logistics infrastructure recently, and fully understands the value of having a strong logistics industry. By leveraging their state owned status to create super sized logistics companies, China would be betting that that the parts are worth less than the whole, and that the whole would provide China’s best hopes for global success.

If there is anyone in this area that may have picked up on this as well, or if you have a theory of your own, please share your comments

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