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Japan shippers merge container businesses

Shares in three Japanese shipping firms have soared on news they're merging their container businesses.

Shares in three Japanese shipping firms have soared on news they’re merging their container businesses. The move is meant to counter a global industry downturn due to too many new vessels entering the market.Three major Japanese container shipping lines announced Monday they were planning to merge their shipping and overseas terminal operations as the industry struggled with overcapacity and mounting losses.

Kawasaki Kisen, Mitsui O.S.K. Lines and Nippon Yusen said they agreed to set up a joint venture with the combined operations to start in April 2018. The three companies added they would also merge their terminal management businesses outside Japan.

“The container shipping industry has struggled in recent years due to a decline in the container growth rate and the rapid influx of newly built vessels, contributing to instability of the industry’s profitability,” the shippers said in a statement.

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The companies noted they’d have a combined fleet capacity of 1.4 TEUs (Twenty Foot Equivalent Unit, specifying the capacity of a container ship), putting them in sixth rank worldwide with a 7-percent market share.

The three shipping lines, which belong to the Hapag-Lloyd and Yang Ming Line alliance expect to save $1.1 billion (1 billion euros) in costs by merging.

The announcement came after South Korean shipping giant Hanjin said it planned to shutter its European business, fueling fears it could be heading towards liquidation.

In response to the global downturn, industry consolidation last month saw France’s CMA CGM purchase Singapore’s Neptune Orient Lines, while Germany’s Hapag-Lloyd and United Arab Shipping merged in June.

hg/sri (AFP, AP)

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