Issue link: http://digital.nexsitepublishing.com/i/643635
www.cargobusinessnews.com January 2016 11 neWs, trends & analysIs foUR ChiNESE ShiPPiNg fiRMS REAligN oN CoSCo-ChiNA ShiPPiNg MERgER Four listed Chinese shipping subsid- iaries will realign their businesses due to the merger between COSCO Group and China Shipping Group. China COSCO Holdings is selling its stake in a bulk shipping company to parent COSCO Group for $1.04 billion. Meanwhile, COSCO Pacific will buy a port operator from China Shipping Container Lines for $1.1 billion. After all deals are completed, China COSCO will specialize in container shipping and COSCO Pacific in operating ports. China Shipping Development, owned by China Shipping Group, will focus on transporting petroleum products, lique - fied natural gas and other items, while fellow group company China Shipping Container Lines will deal with maritime financial services. The companies hope to gain an edge by eliminating any overlaps. China Shipping Development is expected to become one of the world's largest transporters of LNG. The four firms will also technically im- prove their financial position by trans- ferring unprofitable businesses to their unlisted parent companies, but investors could have a harder time determining what's really going on behind the books. The merger between COSCO Group and China Shipping Group will create the world's fourth-largest shipping com- pany by capacity. For more of the Asia Nikkei story: asia.nikkei.com dREWRy: CoNTRACT RATES doWN oN EAST-WEST TRAdES Contract ocean freight rates on the major East-West trade routes saw anoth- er reduction in the last quarter of 2015, according to Drewry's Benchmarking Club, a closed user group of multina- tional retailers and manufacturers who monitor their contract freight rates. The Drewry Benchmarking Club Con- tract Rate Index, based on Trans Pacific and Asia-Europe contract freight rate data provided confidentially by shippers, declined by 5 percent between August and November last year, another fall on top of the sharp decline we saw during the 3rd quarter of 2015. The reduction was driven by a combi- nation of lower fuel costs, excess vessel capacity and intensive competition be- tween shipping lines. Bunker costs fell from the fourth quarter of 2014 and this contributed to a reduction in contract rates negotiated over the course of last year. The fall in the Drewry Benchmark - ing Club Contract Rate Index between February and November 2015 was as much as 14 percent. This trend was also reflected in the spot market. Some of the drop in contract rates was the result of carriers granting ship - pers temporary reductions in contract rates to secure cargo. Drewry notes that a small number of shippers are using spot market rates for a proportion of their volumes. We advise some caution with this approach as volume and space guarantees are not normally warranted and may pose a risk, especially during peak periods. "As expected, contract rates reduced further through the latter part of 2015, as the effect of falling fuel costs and con - tinuing overcapacity weakened market rates," said Philip Damas, director of Drewry Supply Chain Advisors. "Given the volatility of rates in both the spot and the contract market, more shippers are turning to Drewry's Benchmarking Club to ensure that they are securing the best rates in the market." kUEhNE+NAglE oPENS logiSTiCS fACiliTy iN SiNgAPoRE Transportation and logistics company Kuehne+Nagel opened its Singapore Lo- gistics Hub facility on Monday (1-4-2015). Located at Pioneer Crescent, the compa- ny said it invested almost $100 million in the facility - its largest investment outside of Europe - as part of regional expansion plans to support clients operating within Singapore and the ASEAN countries. A total of 495,000 square feet of the 538,000-square-foot facility will be dedi- cated to warehousing space, and 40 percent of the space features advanced chilled storage, redressing and postpone- ment facilities to support pharmaceutical and healthcare companies in Singapore. Apart from the standard freight and warehousing service offerings, Kuehne+Nagel said the new facility will serve as a "center of excellence" for high-tech, industrial, pharmaceutical and healthcare customers, the first for the firm in the region. For more of the Channel News Asia story: www.channelnewsasia.com CoSCo ANd ChiNA ShiPPiNg MERgER To foRM NEW CoMPANy China Ocean Shipping Group Co. (COSCO) and China Shipping Group Co. will form a new entity after merging, to be led by the China Shipping's current chairman Xu Lirong, accordingChina's state-owned assets regulator. The former competitors said in De- cember they would merge through a series of asset swaps, creating units focused on distinct business areas such as container shipping and vessel leasing. Together, COSCO and China Shipping control $74.7 billion worth of assets, Barclay analysts estimated. The merger comes as the government moves to consolidate state-owned in- dustries. For more of the Economic Times story: economictimes.indiatimes.com