Rumours surround OOCL

The latest rumour in the container shipping market is that the Hong Kong based line OOCL is the target for a takeover bid. At this stage, it is unsubstantiated although its shares have risen aggressively on the Hong Stock Market, which may not be saying very much.

However, looking at the numbers from Alphaliner concerning the number and capacity of container ships in the market it can be seen that OOCL is beginning to look a little vulnerable.

According to Alphaliner’s numbers, the Hong Kong based line is eighth with a capacity of 575,000 TEUs (twenty-foot equivalent unit containers), ominously behind soon-to-be acquired Hamburg Sud. Most of those below OOCL are either merging, about to be bought, or are troubled, with ZIM Lines holding on just ahead of Asia Pacific focussed Wan Hai.

What is clear is that the gap between the leading three carriers and the rest is widening. CMA CGM rationalised its feeder fleet which reduced its capacity by 9.3%, yet it remains above 2m TEUs. The next largest line is COSCO with 1.6m TEUs.

Maersk is set to approach 4m TEUs once it absorbs its new German purchase. However, it is worth noting that Hamburg Sud reduced its fleet by 6.6% in 2016 which is likely to be an indicator of the distress it was feeling going into the negotiations with Maersk.

Such consolidation cannot be anything other than a challenge for the likes of OOCL. Although it has a better record of profitability than many others, for the first half of 2016 the company experienced a loss, mitigated by the revaluation of assets. Creating a new company that will be successful in today’s market is not easy. Yet should the Tung family, that holds a controlling stake in OOCL, wish to initiate some sort of process either of merger, purchase, or sale, there probably would be no shortage of targets in the vicinity of the South China Sea.

Source: Transport Intelligence, January 12, 2017

Author: Thomas Cullen