Cartoons

Boxing heavyweight

container-ship-w

On April 26, 1956 something revolutionary happened for global trade. A ship named the Ideal-X was loaded – via crane – with 58 aluminium truck bodies in Newark. Five days later they were unloaded onto 58 waiting trucks in Houston. Such was the birth of the container shipping industry, as described at the beginning of Marc Levinson’s book The Box.

What started in the US has come to be dominated by China, as signalled by a $565 million M&A deal agreed last week. This saw Cosco – China’s state-backed shipping giant – buy five of Singamas Container’s box-making factories. The latter had a second-ranked global market share in the shipping container-production industry of 20% and the consolidation will see Cosco’s total share of the industry rise to 35%. That puts it slightly behind the Shenzhen-based sector leader China International Marine Containers (CIMC) on 40%. Indeed, the top four producers are all Chinese and control around 90% of the container box market, according to National Business Daily.

The seller was Singapore-based Pacific International Lines (PIL) – with the sale designed to help reduce its $3.46 billion debt load. Indeed, the Wall Street Journal speculated in an article this week that the Teo family that controls PIL have also been negotiating with Cosco over the sale of the firm’s entire shipping business. “Executives at the Chinese carrier believe they could wrap up a deal for the entire business if PIL’s owners decide to sell,” it reported.

PIL is the tenth largest container shipping line and has a strong presence on African routes, making it a good fit with Beijing’s broader Belt and Road Initiative (BRI). PIL’s 131-ship fleet is worth around $2.3 billion, according to data provider Vessels Value. PIL lost $140 million in the first half of last year, with a source telling the Wall Street Journal: “If [Chairman] Teo [Siong Seng] wants out, it will take a phone call to Beijing. He is close to Cosco’s top management.”


© ChinTell Ltd. All rights reserved.

Exclusively sponsored by HSBC.

The Week in China website and the weekly magazine publications are owned and maintained by ChinTell Limited, Hong Kong. Neither HSBC nor any member of the HSBC group of companies ("HSBC") endorses the contents and/or is involved in selecting, creating or editing the contents of the Week in China website or the Week in China magazine. The views expressed in these publications are solely the views of ChinTell Limited and do not necessarily reflect the views or investment ideas of HSBC. No responsibility will therefore be assumed by HSBC for the contents of these publications or for the errors or omissions therein.