ONE merger of Japan’s box line businesses cleared for launch

2/3/2018

The new Ocean Network Express (ONE) joint venture combining the container shipping businesses of Japan’s three leading shipping groups, K Line, MOL, and NYK, has received the necessary regulatory clearances in time for its plan to start business on 1 April.

Kawasaki Kisen Kaisha, Ltd., Mitsui O.S.K. Lines, Ltd., and Nippon Yusen Kabushiki Kaisha today announced that their new joint venture company, Ocean Network Express, “has received all necessary merger approvals from local competition authorities in regions and countries where such approvals are required for the launch of service by the newly established joint venture company”.

The lines had announced last July that the JV had completed the approval process in all regions and countries except South Africa. Following continued negotiations with the South African competition authority, the JV “today obtained approval with conditions requiring measures regarding competition law compliance”.

The service commencement schedule for the new company remains unchanged, with operations slated to begin on 1 April 2018.

According to Lloyd’s List, ONE plans to take over all of the contracts with cargo owners from the three constituent Japanese lines, honouring any commitments within contracts that may extend beyond April 2018. ONE would also negotiate with clients directly for new contracts starting from April 2018.

As reported last July in Lloyd’s Loading List, when ONE becomes operational, it is set to effectively become the world’s sixth-largest carrier when measured by containership fleet with close to 1.4 million teu, giving it a market share of approximately 7%, according to analysis by Drewry. And orders for new containerships by the JV’s constituent lines mean that by 2021 it is set to leapfrog Hapag-Lloyd to become the world’s fifth-largest carrier.

Under the terms of the joint-venture agreement – covering only the three companies’ containership activities and non-Japanese terminals – NYK will be the largest shareholder with 38%, while MOL and K Line will both have 31%. The distribution reflects NYK’s greater number of owned ships – active and on order – and terminals that it is putting into the JV.

Between them, the ONE carriers have seen annual container sales diminish by around 20% since the 2014 peak of $20 billion to $15.7 billion in calendar-year 2016.

And between 1Q15 and 1Q17, the three lines have suffered some $1 billion in collective operating losses from container operations, Drewry noted last year, adding: “It is these heavy losses that spurred the ONE lines to finally come together after years of speculation and seek the cost savings to reverse their fortunes.”

The creation of ONE is in keeping with the rising trend of consolidation in the container industry, following on from recent M&A deals involving CMA CGM and APL, Cosco and CSCL, Maersk Line and Hamburg Süd, and Hapag-Lloyd with UASC.

As reported yesterday in Lloyd’s Loading List, following completion of the remaining deals that will see OOCL become part of Cosco, and the three big Japanese carriers merge their container operations to form the Ocean Network Express, the leading seven carrier groups, inclusive of all subsidiaries, would control approximately 90% of the active containership fleet as it stood on 1 October according to Drewry .