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Top three Japanese liner companies to combine into joint-venture firm

New firm to become world's sixth largest liner company with 7-percent share.

Buffeted by vessel overcapacity and continued sluggish demand, Japan's three main shipping groups—Kawasaki Kisen Kaisha Ltd., or "K" Line; Mitsui O.S.K. Lines Ltd. (MOL); and Nippon Yusen Kabushiki Kaisha (NYK Line)—will spin off their container-line businesses into a joint-venture company that would have a 7-percent share of the global liner market and become the world's sixth-largest container shipping company.

The new company, expected to be established next summer and begin operations in April 2018, would have a fleet of about 1.4 million twenty-foot equivalent unit (TEU) containers. About 35 percent of those would belong to NYK, the largest of the three carriers. NYK will also be the largest shareholder with a 38-percent share. "K" Line and MOL would each hold 31-percent shares. The companies would also combine all terminal operations outside of Japan.


The announcement is the latest in a series of vessel-sharing alliances in response to the twin problems of sluggish global demand and an influx of expensive mega-vessels, which have become a cost drain on carriers, especially during a prolonged slow-growth cycle. Vessel-sharing agreements are the liner industry's approach to gain economies of scale through joint operations of mega-ships. It is also the industry's acknowledgment that there are limits to what an individual carrier can do to combat these powerful forces.

The three carriers are already members of "THE Alliance," currently a five-carrier consortium covering all east-west trade lanes. There is also the "2M Alliance" formed by Danish carrier Maersk Line, the world's largest by capacity, and Swiss-based Mediterranean Shipping Co., as well as the "Ocean Alliance," established by China Cosco Shipping, Taiwanese carrier Evergreen Line, French carrier CMA CGM, and Hong Kong-based OOCL.

By 2017, when all three alliances are operational, they will account for about three-fourths of all global TEU capacity, according to Freightos, a logistics technology company.

Freightos estimates that 3.4 percent of global container capacity will be removed in 2016, largely due to the bankruptcy of South Korean liner company Hanjin Shipping Co., which was the world's seventh-largest liner company. Historically, 1 percent of container capacity, on average, was removed from the market each year, according to Freightos estimates.

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