NYK, K-Line, MOL team up to form the Ocean Network Express

Three Japan-based container shipping carriers, Kawasaki Kisen Kaisha, Ltd. (K-Line), Mitsui O.S.K. Lines, Ltd. (MOL), and Nippon Yusen Kabushiki Kaisha (NYK) said this week they have rolled out a new joint venture, entitled Ocean Network Express.

A statement issued by K-Line said that the establishment of this joint venture will integrate the companies’ container shipping businesses, including worldwide terminal operation businesses, excluding those in Japan, as per the Notice of Agreement to the Integration of Container Shipping Businesses” which was released on October 31, 2016.

The establishment of a holding company is currently planned in Japan, with an operating company planning to be incorporated in Singapore, as well as regional headquarters located in Singapore, Hong Kong, United Kingdom (London), United States (Richmond, VA), and Brazil (Sao Paulo).

“The move will allow Ocean Network Express to better meet customers’ needs by providing high-quality, competitive services through the consolidation and enhancement of the three companies’ global network and service structures,” K-Line said. “Following the announcement on October 31, 2016, the three companies have been progressing towards their target of establishing the new JV. The establishment of new JV will officially be announced once all anti-trust reviews are completed. The service commencement date for Ocean Network Express is April 1, 2018.”

At the time of the October announcement, the companies said that their decision to merge came on the heels of low oil prices, sluggish cargo demand, oversupply of trade capacity and container freight rates at historic lows, according to a report in Seatrade Maritime News.

The Ocean Network Express will provide service across 90 countries, according to the joint venture’s Website, with a fleet size of 1.4 million TEU (Twenty-Foot Equivalent Units), which is firth in the market and represents around 7% of global share (based on data from Alphaliner).

Ben Hackett, founder of maritime shipping consultancy Hackett Associates, said that the benefits of Ocean Network Express vary, depending on the perspective of the stakeholder.

“From a shipper, or beneficial cargo owner perspective, this will take more competition away,” he said, “but on the carrier side, they said it creates more [strategic] rationale, gets rids of potential excess capacity, and creates a more unified company. It does not impact pricing, except that there will be a unified pricing structure for one company instead of three.”

In terms of capacity management, he said things will remain more individual, but with each carrier currently part of THE Alliance, they are also able to jointly manage capacity already.