Sinotrans and Yangtze Shipping to Merge

Thursday, July 10, 2008 10:07
Posted in category China Logistics
Comments Off on Sinotrans and Yangtze Shipping to Merge

Last year while doing some research on the Yangtze’s port, we learned from one port manager that the central party was looking at restructuring China’s mega carriers to create super mega carriers.

Following that conversation I wrote Are Super Logisitics Mergers in China On the Way? describing the potential pairings (and reasons for the pairings), and 9 months later it looks like the first of potentially 3 mergers is now officially underway.

As reported by the Reuters article Sinotrans and Yangtze agree on logistics merger the largest river carrier and the largest freight forwarder are now pairing up. the deal, yet to be final would provide an interesting match (can you imagine combining 2 SOEs?).

If it goes ahead, the move would create a sprawling transport corporation operating everything from marine, oil and river shipping to express delivery, freight forwarding and warehousing, as Beijing spurs consolidation of a large but fragmented sector.

Where china’s market is ripe for more tie ups like this is simply the fact that its logistics industry is highly fragmented, and very inefficient. with 10,000s of firms operating on an at best provincial level (only a handful could be considered national), there is a real need to start roping the largest regional carriers together.

I have seen statistics that show China’s logistics costs are 20% of GDP, double the US or EU, and it is only through a reduction in fragmentation that this will occur as a reduction in the number of firms will result in a larger number of firms investing in infrastructure, trucks, driver training, and technology.

From the consumer side, while this merger in particular may/ may not have an impact right away, I am hopeful that this will make it easier for us to move goods up and down the river, and depending on how it all plays out this could prove to be one of the more critical steps in truly developing the full potential of the Yangtze

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