Cosco: Every Port in the Storm

Cosco: Every Port in the Storm

It seems Baron Rothschild’s renowned words “When there is blood on the streets, buy land” have been taken to heart by Cosco.

With the ocean cargo market suffering from close to record low freight rates, a flat global market and amid chronic overcapacity, few seem to be escaping the effects.

In recent months we have seen the largest collapse of a shipping line in history, Hanjin, more than six times larger if Alphaliners calculations are correct.

Japanese shipping line Nippon Yuesen, NYK Line, recently announced that they would book a staggering $1.9 billion loss in the second quarter of this year.

ZIM announced a $115 million debt restructuring plan with creditors, handing over two-thirds of the company in the process.

And although the carrier has been called out to refute claims they are on the brink of bankruptcy, rumours have been circulating around the financial health of K-Line.

But what of Cosco, the Chinese carrier is seemingly sitting pretty in the league tables fourth spot with a 7.5 percent market share.

However since Hanjin hung up their gloves, like a game of Monopoly on an unprecedented scale, Cosco have been going after container terminals left, right and centre.

Xu Lirong, Chairman of Cosco Shipping Group, announced that they were looking into port assets of the failed carrier, subsequently confirming they are in early-stage negotiations to acquire one in South Korea and a second in Long Beach, California.

Lirong made it clear however that they had no interest in Hanjins vessels, not surprising as they have an additional 20 percent of current vessel capacity sitting on their order book.

If you have the cash, then buying up Hanjin terminals is sensible with bargains inevitable as Hanjin’s rehabilitation plan looks unlikely to succeed.

Following this announcement, Cosco also confirmed they have signed a concession agreement with Abu Dabi ports for the development and operation of Khalifa’s second terminal.

Lirong feels that Khalifa port and its surrounding infrastructure makes it well placed to become the next hub port in the Middle East, and with the backing of the Ocean Alliance comprising of CMA CGM, OOCL and Evergreen Line it’s an idea that’s not too far-fetched.

Meanwhile, Maersk, as usual, are sitting on the side line watching the game play out like a Russian chess Master, issuing statements declaring no interest in Hanjin vessels but would continue to keep an eye out for a smaller distressed carrier.

Is this gospel or are they just churning the milk? Making such an announcement whilst creditors continue to unwind Hanjin’s finances may drive down prices allowing them to snap up a boat or two in overtime, or perhaps they’re simply willing to let the opportunity go.

Whatever Maersks tactics, their statement of intent shouldn’t overshadow Cosco’s plans as their story unfurls.

Pending negotiations with Hanjin, Cosco could potentially gain new hubs in Southeast Asia and the West Coast of America, which would complete a new global triangle with the terminal in the UAE.

Could Cosco’s aggressive acquisitions of terminals be confirmation that the board agrees with Drewry predictions that in the near future the ocean cargo market will be dominated by as few as eight carriers?

They seem to be shoring up their asset portfolio with strategically positioned hubs. We are seeing the tides turn but in which direction, time will tell.