Why is China building a New Silk Road?

2000 years ago, merchants and caravans began moving between east and west along the Silk Road, trading goods, philosophy and technology.  The very name Silk Road conjures images of caravans, desert steppes and adventurers like Marco Polo navigating the ancient trading routes connecting China with Central Asia, the Middle East, Africa and Europe.  

Now a modern Silk Road, rekindling trade and achieving common prosperity, is in the making. Yes, Mighty China is reviving the historic Silk Road trade route that runs between its own borders and Europe.  China’s modern-day adaptation aims to revive those historical routes via a network of railways, ports, pipelines and highways. President Xi Jinping champions his pet project as a means to spur development, goodwill and economic integration, as well as find markets for China's over-producing factories. Critics — both along and beyond the Silk Road routes — are wary of China's push to spread its influence further west. 

What is OBOR? 
The Silk Road Economic Belt and the 21st-century Maritime Silk Road, also known as The Belt and Road (abbreviated B&R), One Belt, One Road (abbreviated OBOR) or the Belt and Road Initiative is a development strategy and framework, proposed by Chinese paramount leader Xi Jinping that focuses on connectivity and cooperation among countries primarily between the People's Republic of China and the rest of Eurasia, which consists of two main components, the land-based "Silk Road Economic Belt" (SREB) and oceangoing "Maritime Silk Road" (MSR). The strategy underlines China's push to take a bigger role in global affairs, and its need for priority capacity cooperation in areas such as steel manufacturin

The Belt and Road Initiative, proposed by Chinese president Xi Jinping, has gained traction in the last three years, scholars and officials said. A new Silk Road is being formed, and the main structure has roughly taken shape, through better links between cities along the routes, trade zones, international economic corridors and improved ports,

In June 2016, the Renmin university of China published a report on the progress of the initiative, chronicling successes in transportation, pipelines and telecommunication infrastructure, trade expansions, financial and cultural cooperation.

More than 2000 train services operated between China and Europe

Notably among the successes, more than 2,000 train services operate each year between China and European countries, shipping laptops, dinnerware and oil-drilling equipment to Europe and bringing back food, wine and baby formula.

"Most countries along the Belt and Road are developing countries eager for better economic performance. By supporting the initiative, we are seeing better economic vitality and regional economic integration," said Fang Aiqing, vice commerce minister of China.

How many trade corridors planned?

Announced in 2013 by President Xi Jinping, the idea is that two new trade corridors – one overland, the other by sea – will connect the country with its neighbors in the west: Central Asia, the Middle East and Europe.

Why is China building the New Silk Road?

There are strong commercial and geopolitical forces at play here. 

China's Industrial Overcapacity: China’s vast industrial overcapacity – mainly in steel manufacturing and heavy equipment – for which the new trade route would serve as an outlet. As China’s domestic market slows down, opening new trade markets could go a long way towards keeping the national economy buoyant.

Hoping to lift the value of cross-border trade to $2.5 trillion within a decade, President Xi Jinping has channeled nearly $1 trillion of government money into the project. He’s also encouraging state-owned enterprises and financial institutions to invest in infrastructure and construction abroad.

“It is not an economic project, it is a geopolitical project — and it is very strategic,” Nadège Rolland, an analyst at the National Bureau for Asian Research, told foreignpolicy.com. He's not alone in suspecting China of a tactical repositioning in the global economy; it's clear that relationships with the ASEAN region, Central Asia and European countries stand to improve significantly if China directs more of its capital into developing infrastructure overseas.

Moreover, by striking up economic and cultural partnerships with other countries, China cements its status as a dominant player in world affairs.

China's OBOR - Will it reshape Global trade?
Will China's OBOR breathe vitality into the Global economy? 

Global economy is still plagued by problems of weak growth, weak demand with financial fluctuations lurking round each corner. The Belt and Road initiative targets growth and rebalancing global economy, said Fang.

Over 30 countries have signed inter-governmental agreements on the initiative with China. From January to August this year, trade along the road exceeded 600 billion U.S. dollars, about 26 percent of China's trade total. Direct investment by Chinese companies was over 10 billion U.S. dollars, commerce ministry statistics show.

Contracts were worth over 70 billion U.S. dollars, up 28.3 percent year on year. Projects such as a highway in Pakistan, high-speed railway in Turkey and rail link between Hungary and Serbia, are well under way.

China has built 56 economic or trade zones overseas, and created more than 163,000 jobs in Belt and Road countries and regions.

Thai-Chinese Rayong Industrial Zone in east Thailand is one of the most successful zones. Covering 12 square kilometers, it hosts 80 companies and provides jobs to more than 20,000 workers. "We call it the industrial China town," said Wu Guangyun, vice manager of the industrial park.

"The new Silk Road is by no means a private path for China. Rather, it is a grand avenue that accommodates the prosperity of many nations," said Fang.

The initiative also encompasses cultural, educational, tourism and archaeological exchanges.  "We have the chance to explore ancient tombs in the south of Uzbekistan. I look for more such academic cooperation," said Feng Jian, director of relics protection in Xi'an, a key city along the ancient Silk Road.

China's Modern Silk road

Ancient Wisdom Revisited?  

He Lifeng is another ministerial official who shares conviction in the bright future of the new Silk Road. "History can be silent but it never disappears, and it is time to recall past experiences to shape the future," said He, deputy head of the National Development and Reform Commission, China's top economic planning body. "Global economic recovery in the past few years has been hard and circuitous. International trade and investment are slow, and globalization has met immense challenges," he said.

"Faced with the challenges, we need to draw wisdom and beliefs from our ancestors and take action to break the stalemate and make a difference," he said.

The ancient silk road turned post houses and small oases into great cities, and brought about exchange among the world's greatest civilizations.

"We need to remember that when the ancient road was in its prime, China was a strong and open nation. Through the new Belt and Road initiative, China aims for further opening-up and common prosperity.

CHINA'S OBOR - India's interests?

CHINA'S OBOR -  India’s interests
Ever since China launched OBOR, most Indian analysts have regarded it more as a threat than an opportunity. Only a minority, consisting almost entirely of economists, have seen it as an opportunity to modernize India’s infrastructure and pave the way for rapid industrialization and employment growth. What it turns out to be will depend entirely upon what India wants it to be.

The incontrovertible fact today is that China has the finance capital, the technology and above all the overwhelming need , in its own national interest, to accelerate the development of these countries to an extent that could not have been imagined even half a decade ago. It is also an incontrovertible fact that the tunnel, road and rail links that it intends to build will pierce the natural ramparts of South Asia, the Himalayas, and end India’s geographical hegemony over the rest of south Asia.


If India chooses to stay out of OBOR it will only increase its isolation within South Asia, and hasten the end of its regional hegemony. But what will be even less excusable is that it will pass up a once-in-history opportunity to harness China’s economic muscle to India’s development. The way to avoid this is to join OBOR, invite Chinese investment in Indian infrastructure, and use the connectivity this creates to increase trade and investment with other south Asian countries and, of course, with China.

YEAR 2016 THE YEAR THAT WENT BY FOR GLOBAL SHIPPING

YEAR 2016

THE YEAR THAT WENT BY FOR GLOBAL SHIPPING INDUSTRY

After the recent collapse of South Korean company Hanjin Shipping, unease surrounds the fate of the global shipping industry which carries 90% of the world’s goods and is vital for global trade and economic prosperity, yet there are too many signs pointing to the industry’s decline.

Several nations rely on shipping to import and export almost all goods and products. Downturns  in the global shipping environment will cause a hike in living costs.

-> Lesser players? Good news for Shipping Lines..Not so good for customers!

The Global Shippers Forum, a trade association for shippers, warns that less competition between lines will increase shipping rates. This could drive up the price of imported goods on shelves and make exports less competitive in the global market for many countries.

-> Hanjin goes bankrupt! More to follow the Hanjin way?

After the demise of Hanjin and the massive disruption caused to the global supply chain, there are rumours that more shipping companies are in trouble. 

Ratings agency Fitch is expecting more defaults among shipping lines, with very few assets easily convertible to cash and limited access to bank funding.

-> Slowing world GDP growth & Overcapacity... & scrapping new ships

A number of factors have led to uncertainty in the industry. A slowing of world GDP growth has resulted in less containerised goods being transported around the globe, causing an oversupply of ships and downward pressure on freight rates.

In an effort to minimise costs, shipping lines are building larger and more efficient container ships, aggravating the oversupply issue.

Severe Overcapacity is one of the driving forces behind the liner shipping co.s' troubles, and managing capacity, which worldwide will break the 20-million-TEU barrier in a matter of months, would be at the center of an industry recovery.

As demand is not expected to grow at a pace needed to match the capacity of new ships entering the fleet, extensive idling of the modern and efficient ships in the fleet, and continued demolition of the inefficient ships will improve the market both in the short- and mid-term. 
For the longer-term management of capacity, a low level of contracting for newbuildings must be maintained.

Scrapping – Unsafe Ship breaking @ the cost of human lives?  Issue remains unaddressed

On 4 December, worker Shah Jahan was killed on the spot at Arefin shipbreaking yard in Chittagong, Bangladesh, where German container ship “Viktoria Wulff” (IMO 9252101) is currently being dismantled on the beach. The 35-year old man, who was made to work without any safety measures, was struck on the head by a heavy iron piece.

German ship owner Wulff went bankrupt in August and the insolvency administrator is currently selling off the company’s remaining vessels. The “Viktoria Wulff” became the youngest container ship to be sold for demolition at an age of only 10 years without a previous accident.

“The story of the ‘Viktoria Wulff’ is characteristic for the failed business practices of German KG ship owners as well as ship funds. Nearly 600 ships have been sold due to insolvencies and financial problems since 2008, many of which ended up on the South Asian beaches. The bill for the ship owners’ and investors’ greed for profit is paid by workers and the environment in destinations like Bangladesh, where ships end up without any consideration of the human and environmental costs”, says Patrizia Heidegger, Executive Director of the NGO Shipbreaking Platform. “It is a scandal that German liquidators, who are appointed by the courts, sell end-of-life ships to substandard breaking yards risking peoples’ lives through deals that are in clear breach of international and even domestic Bangladeshi law just to sort out the books for German ship owners”.  Going forward, the shipbreaking yards have to be moved away from the muddy beaches to clean and safe ship recycling facilities using quays and docks where cranes can be operated to safely move cut steel sections. Otherwise, the death count of beaching will not come to a halt.

-> How Lines have started Fighting back against slowing growth

Mergers & Acquisitions, Alliances, Sell-offs: One response to the slowing of global growth and oversupply of ships has been to MERGE shipping companies. For example: CMA-CGM has acquired APL. Hamburg Süd, a large German shipping company established 140 years ago, has just been sold to Maersk Line, the largest shipping line in the world. So is the J3 – merger of Japanese lines in response to the COSCO-CS merger and strong 2M alliance of MAERSK & MSC.

Ship cos Go HIGH TECH with Unmanned ships & Automated terminals: Faced with reduced margins, the industry has looked into introducing worker automation to reduce labour costs. Driverless trains already haul hundreds of thousands of tonnes of iron ore in Australia. Fully or semi-automated container terminals, where driverless equipment loads containers onto vessels, are becoming more common.

Rolls-Royce Marine, in conjunction with a number of Northern European universities, is researching unmanned ships, which will move around the globe monitored from central control rooms. Japanese shipping company Mitsui OSK is forming a “Smart Shipping Office”, which will develop technologies for safer ship operation, with the ultimate goal of autonomous sailing.

Shipping companies go HI TECH

Autonomy is largely being seen as the next big disruptor in the maritime world. 
Worldwide, the number and scope of projects dedicated to unmanned vessels is increasing, including the world’s first designated test area for autonomous ships and European Union-funded research.

->  Developments in Shipping are affecting Countries ! 
How Countries around the world are implementing policies to protect their supply chains and shipping industries?

China has become a prime example, protecting its global supply chains by reinvigorating the old “Silk Road” overland route and establishing a maritime equivalent.

The USA, another major global player, also plans to establish more protectionist trade policies. President-elect Donald Trump has declared he will renegotiate trade agreements and review US coastal shipping policies.

Countries with heavy reliance on shipping, need to follow these countries’ footsteps and act now to ensure foreign shipping interests do not hold them to ransom.

The Future Mobility Solution - Electro Mobility !

What does Electro Mobility (E-Mobility) mean?

Electro mobility (e-mobility) is a general term for the development of electric-powered drivetrains designed to shift vehicle design away from the use of fossil fuels and carbon gas emissions.

The term electro mobility includes full electric vehicles, as well as hybrid electric vehicles and those using hydrogen fuel cell technology. All of these represent ideas for electronically driven vehicles for the future. Discussions about electro mobility are sometimes combined with other concepts such as microcontrollers and sensors that work toward better energy efficiency for vehicles. Features like battery balancing can also play a part in designing smarter vehicles for the 21st century.

Some experts also tie the emergence of electro mobility designs to the idea of smart power grids that will provide the energy that these vehicles run on. Improving the efficiency of the vehicle goes along with improving the efficiency of the grid, and these efforts, in tandem, lead to the greatly reduced energy needs and carbon gas emissions that national governments, as well as manufacturers, are looking for in the coming years.

Johammer's J1

Leading examples of Electro Mobility

Johammer's J1 

Watch the Video on Johammer J1

There is no familiar rumble that made Harley Davidson famous. Only a whine from the electric motor that increases linearly as you rush for the horizon.

This is the Johammer J1, a cruiser like no other. Designed and built in a small Austrian factory near the Czech border, the distinctive shape has been likened to a giant peanut, a prewar Junkers airplane or even a medieval jousting steed. The outrageous design seems more at home in the living room than the garage.

"This is a natural return to the concept of the horse, before there was noise and pollution from engines," says Johann Hammerschmid, founder of Johammer e-mobility GmbH.

First released in late 2014, some 60 Johammers are storming across Europe. While it's the first electric motorcycle to cover more than 300 kilometers (186 miles) on a single charge, what comes next might make it even more revolutionary. The next generation, now under development, while parked might also double as battery storage behind home solar-power panels. A prototype-think of a Tesla Powerwall on wheels-is already in use in Switzerland.

Fifty-six-year-old Hammerschmid first thought of an electric vehicle in 2007, and it took shape over the years as essentially a weekend project. His other company, Nordfels, solves complex engineering problems. With a team of fewer than 40 it makes factory lines for the food, drug and farm industries. Their latest machine, for example, toasts 5,000 sandwiches per hour.

The bike's top speed is limited to around 75 miles an hour to avoid energy-sapping wind resistance. Acceleration is fun, not fast, but you forgive its limits to sheer performance. It's like ditching a motorboat for sailboat-both are pleasurable in their own ways.

There's some clever engineering. The J1 has no dashboard, instead data are displayed on the rearview mirrors. A reverse twist of the throttle turns the drive motor into a generator that acts as a brake and quickly scrubs speed. It's so efficient the disc brakes are relegated to helping with slow-speed stopping. And it's got a reverse gear for parking. Safety-certified items-wheels, tires and brake disks-were sought commercially, and most of the rest was built in house.

Two versions of the J1 are available. The top spec J1.200 costs 25,000 euros ($26,750), capable of traveling 125 miles on tough terrain, and 186 miles urban-more ground than a standard Harley-Davidson Sportster can cover. A full recharge takes 3.5 hours, but it can be blast-charged in 80 minutes.

"We're at the stage cars were at 100 years ago. The infrastructure was limited but it grew quickly," says Hammerschmid. "The same will happen with e-vehicles, and it won't just be gas stations used for recharging." Homes, workplaces, shopping malls, parking garages-all will become places to recharge.

The battery is assembled at the Johammer factory from more than 1,200 individual cells capable of holding 12 kilowatt-hours, close to the Powerwall's 14 kwh. There are plans for a sidecar model, which would allow a bigger battery and increased range.

Ultimately, the Johammer's selling point is about pushing technology and design. Its uniqueness is what draws people willing to pay a premium for their passions, despite its price topping models offered by more mainstream rivals such as Victory and Zero.

VOLVO HX1

VOLVO HX1 

Watch Video on VOLVO HX1

Volvo's prototype HX1 represents a new approach to a sustainable future, based on the concept of electro-mobility and autonomous vehicles.

Rather than having a few, large, versatile machines, as is common at quarry and mine sites today, the HX1 demonstrates the emergence of smaller and more numerous specialist machines.

Volvo CE say this ‘elephants to ants’ concept is a new way of meeting customer needs, combining intelligent machines, automation and electromobility.

The HX1 forms part of Volvo CE’s long-term ambition of achieving sustainable transportation solutions.

The concept HX1 features a totally new and revolutionary approach to transportation systems, introducing a shift to smaller and autonomous electrified vehicles.



The above concepts are groundbreaking in the industry and gives us a glimpse of how the future may look.

Time out for the Taiwanese Trio???

IS IT TIME OUT FOR TOP 3 Taiwanese shipping companies? 

Yes, time is running out for Taiwanese shipping majors! Taiwan’s top three container lines reported worst ever Q1 results as they became the latest carriers to suffer from a market defined by weak demand and massive overcapacity that has pushed down freight rates on the world’s major trade lanes.

Wan Hai - World's most profitable carrier barely manages to avoid losses
Profit at Wan Hai Lines fell 22 percent, but the intra-Asia carrier was able to avoid falling into the red. Net profit at Wan Hai fell to 42.99 million Taiwanese dollars ($1.3 million) in Q1. Wan Hai last year was the world’s most profitable container line by profit margin.

Losses all the way for Yang Ming & Evergreen
Yang Ming’s profit collapsed in the first quarter with a loss of 3.66 billion Taiwanese dollars against a profit of 303 million Taiwanese dollars in the same period last year. Revenue dropped 18.2 percent year-over-year to 27.1 billion Taiwanese dollars.

Revenue at Evergreen fell 18.9 percent year-over-year in the first quarter to 28.6 billion Taiwanese dollars. The carrier's operating income swung to a loss of 3.8 billion Taiwanese dollars from a gain of 1.8 billion Taiwanese dollars in the same quarter of 2015. 

OVERCAPACITY IN CONTAINER SHIPPING !

Severe Overcapacity is one of the driving forces behind the liner shipping co.s' troubles, and managing capacity, which worldwide will break the 20-million-TEU barrier in a matter of months, would be at the center of an industry recovery.

As demand is not expected to grow at a pace needed to match the capacity of new ships entering the fleet, extensive idling of the modern and efficient ships in the fleet, and continued demolition of the inefficient ships will improve the market both in the short- and mid-term. For the longer-term management of capacity, a low level of contracting for newbuildings must be maintained. 2016 is off to a good start on all these parameters.

LIGHT @ THE END OF THE TUNNEL?

Merger options?
There are proposals that Yang Ming merge with another shipping firm or a shipping-related service operator like Taiwan International Port Corp (TIPC).  It might be difficult to merge it with the nation’s largest shipping firm, Evergreen Marine Corp (長榮海運), as one is a state-run company and the other is a privately owned firm.
A merger between Yang Ming and TIPC would be more viable, with the latter also being a state-run firm that operates seaports

Wan Hai has already rejected the idea of mergers. Shipping lines like RCL, OOCL and Evergreen might look at merger options in the near future considering the challenges being faced by the container shipping industry.

Taiwanese Govt relief package

Taiwanese Govt. came to the rescue of Taiwanese Shipping Lines. Earlier in November 2016, Taiwan’s government approved a $1.9 billion relief package to Taiwanese companies Evergreen Marine and Yang Ming Marine Transport, two of the world’s biggest container operators.

Evergreen and Yang Ming, the two shipping lines that move the majority of Taiwan’s exports, have posted a combined loss of more than $580 million thus far in 2016. A possible merger between the two companies was halted due to the fact that they belong to competing global shipping alliances.

Both Evergreen and Yang Ming are considered integral to the country's economy, and are receiving credit lines with an interest rate of approximately 2.9%.

GLOBAL ECONOMIC DOWNTURN - 

SURVIVAL OF THE FITTEST!

The long-running global economic downturn having left the industry drowning in excess capacity. With growth refusing to budge and consumer demand still slack, the world’s freight carriers have more ships than they can fill — a quarter of cargo space lies empty. 

It will be the survival of the fittest in Container Shipping & also lines that are fastest to adapt by either mergers or an exit/sale will survive.... unless and until they really want to go the HANJIN WAY !!!

Up for Sale? Who is next

The container-shipping industry has been highly unprofitable over the past five years. Making things worse, earnings have been exceptionally volatile. Several factors are responsible, notably trade’s spotty recovery from the global financial crisis, and redoubled efforts by corporate customers to control costs. Some of the pain is self-inflicted: as in past cycles, the industry extrapolated the good times and foresaw an unsustainable rise in demand. It is now building capacity that appears will be unneeded.

These problems are real and significant, and largely beyond the power of any one company to address. But shipping companies cannot afford to throw up their hands and accept their fate.

These developments are leading to alliances, mergers, acquisitions & sale!

Latest in the race is Hamburg Süd. The owners of Hamburg Süd are tipped to opt for an outright sale rather than a merger. A sale of the Hamburg Süd by the family owners Oetker conglomerate, which runs the gamut from pizza and beer to financial services and shipping, would accelerate the consolidation that has significantly reshaped the financially troubled industry this year.

Who are the buyers?
On 1st December 2016 - Maersk Line and the Oetker Group have reached an agreement for Maersk Line to acquire Hamburg Süd, the German container shipping line. The acquisition is subject to final agreement and regulatory approvals.

Maersk CEO Soren Skou confirmed in September that Maersk Line is mulling acquisitions in its bid to grow in line with the market when he unveiled the group’s new strategy that will split its shipping, ports, and logistics operations from its energy division.

One company's loss is Another company's gain!

Hamburg-Süd has twice held merger talks with Hapag-Lloyd, most recently in 2012 and 2013, but the companies failed to agree on shares in an enlarged carrier. Hapag-Lloyd last week secured approval from the European Union for its takeover of United Arab Shipping Company.

Up for sale? Who is next?

Hamburg Süd, along with Orient Overseas Container Line, Yang Ming Line, Hyundai Merchant Marine, and Zim Integrated Shipping Services, are coming under increasing pressure to consolidate following a spate of merger and acquisition deals that have seen the market leaders pull ahead of mid-ranked carriers.

Hamburg Süd – as a line

Hamburg Süd has focused on north-south routes, particularly Latin America, where it strengthened its position with the $160 million acquisition of the container line services of Chile’s CCNI in 2015, and recently moved into the east-west market through a cooperation agreement with UASC.

The carrier operates a fleet of 116 ships — 44 owned and 72 chartered — with an aggregate capacity of 600,344 twenty-foot-equivalent units and a market share of 2.9 percent, according to industry analyst Alphaliner. It has eight ships of 30,400 TEUs on order.

The Hamburg-based line, which is also involved in bulk shipping and product tankers, boosted revenue by almost 17 percent in 2015 to just over 6 billion euros ($6.4 billion) driven by the acquisition of CCNI and its debut on the east-west liner trades. Container traffic last year was up 21.5 percent at 4.1 million TEUs.

Unlike the majority of its competitors, Hamburg Süd is not a member of an alliance. The company does not publish profit and loss figures.

J3 for shipping - from land of the rising sun

Japan’s big three shipping majors – NYK, K Line, have decided to end decades of fierce rivalry and merge their container shipping businesses into a new line ( a new joint-venture company ) with a total capacity of 1.4m TEUs , which would rank as the sixth largest in the world and have a global market share of approximately 7%.

J3 - Stronger together

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When will J3 be operational?

The deal was subject to shareholders’ agreement and regulatory approval with a planned establishment of the new company scheduled for 1 July 2017, and the target for business commencement set for 1 April 2018.

What is in it for the shipping trade?

·         “J-3” will become the world’s sixth-largest container line, with the top seven lines controlling around 65 percent of the global liner capacity by 2018.

·         The J3 will operate a combined fleet of some 1.4million twenty-foot-equivalent units with a global market share of about 6.6 percent, based

·         J3’s JOINT order book totals 358,000 TEUs

Before J3 & After J3

According to vesselsvalue.com, NYK owns the largest container fleet, with 68 vessels providing a total capacity 507,046 teu, valued at $2.33bn; followed MOL, with 35 ships for 307,449 teu, valued at $1.7bn, and third K Line, which owns 31 containerships with a capacity of 240,440 teu and a value of $1.2bn.

It has been agreed that the shareholding of the container line joint venture will be: K Line 31%, MOL 31% and NYK 38%, with a total contribution of Y300bn, including fleets and share of terminals, but will exclude terminal operating business in Japan.

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Why go for J3?
We will look at the reasons for J3 :

1.    Stability : The three Japanese companies have made efforts to cut cost and restructure their business, but there are limits to what can be accomplished individually. Under such circumstances, the 3 carriers have decided to integrate their container shipping business so that they can continue to deliver stably high quality and customer focused products to the market place.

In the past few years container liner shipping has been a problem child for all three of the Japanese trio as they have found themselves increasingly unable to match the economy of scale unit benefits enjoyed by the big three of Maersk Line, MSC and CMA CGM.

2.   J3 is part of THE Alliance: A factor in the decision to merge their container activities is that the Japanese carriers will all be members of the new THE Alliance east-west vessel sharing grouping from April next year, which makes the integration significantly less complex.

After the bankruptcy of Hanjin Shipping and the merging of the Japanese trio - THE Alliance will be streamlined into three carriers: Hapag-Lloyd, Yang Ming and the new Japan carrier J3 , thus overcoming the “too many cooks” criticism that has previously been levelled by analysts at the grouping.

3.     Japanese shipping majors share a Common corporate culture : Moreover, the Japanese shipping groups have a close relationship that stems from their “common corporate culture” with senior executives and operational management naturally familiar with their counterparts at the other companies.

4.      Competition’s M&A activity:  The container shipping industry witnessed a flurry of M&A activity in the past year – with of CMA CGM’s acquisition of NOL, Hapag-Lloyd’s merger with UASC, and the merging of the two Chinese state-owned lines – has widened the gap in this sector and proved a drag on consolidated group results for the Japanese companies.

According to Alphaliner data the merger of Hapag-Lloyd and UASC will lift the German carrier to fifth in the world rankings at 1,479,968 teu capacity, behind the merged Cosco and CSCL at 1,560,999 teu, with the proposed Japanese grouping taking the sixth spot with 1,369,728 teu.

Top Lines - in 2018?

Other facts: The three companies all operate portfolios of diversified enterprises that include: bulk shipping, car transportation, LNG, tankers, offshore, energy heavy lift and air cargo transportation.The three japanese majors have significant overlapping interests in terminals worldwide which may need to be rationalized.