Cosco gets new chairman as China Shipping merger drags on

Ma Zehua, the man who replaced Wei Jiafu as chairman and party secretary for China Cosco Holdings in 2013 when the charismatic executive quit unexpectedly, stepped down Thursday as chairman of the mainland’s largest carrier.

He will be succeeded by non-executive director Wan Min, China Cosco said in a filing to the Hong Kong Exchange. The company announcement said 63-year-old Ma was resigning “due to change of work positions.”

Listed Chinese companies are sensitive about movements of their top executives as the corruption crackdown on the mainland continues to ensnare high profile management, with the result that Ma’s resignation announcement was accompanied by the following clarification.

“Mr. Ma Zehua has confirmed that he has no disagreement with the board, and there is no other matter in respect of his resignation that needs to be brought to the attention of the shareholders of the company.”

But whatever the reason, Ma is hitting the gangplank just as Cosco and China Shipping begin to merge in a process that is expected to take most of the year. Unravelling the complex web of listed entities in Hong Kong and Shanghai and other businesses and sectors will take all the creative genius the State-Owned Asset Supervision and Administration Commission  can muster.

Leading the merged entity that will be named China Cosco Shipping Group— and presumably directing the merger process itself — will be China Shipping Group’s chairman, Xu Lirong. As chairman of the new outfit, Xu will preside over a series of asset swaps with a bag-shaking change of focus of some business units.

The biggest surprise was China Shipping Container Lines exiting the container shipping business. CSCL will become a ship leasing specialist and China Cosco will take over over all box transportation. It is difficult to imagine anywhere else in the world where a Top 10 container shipping line could be converted to a ship leasing and finance company.

It is being billed as consolidation, but the merger of the container divisions of China’s two largest carriers will not take any of the surplus capacity out of the market, merely packaging the two fleets under one name. What it will do is cause significant disruption to the alliance structures under which most container lines in the industry operate.

CSCL belongs to the O3 Alliance while Cosco is with the CKYHE. Combine that with O3’s CMA CGM buying G6 Alliance unit APL (via Neptuen Orient LInes), and you have three of the four alliances that have some serious issues to tackle.

The Cosco-China Shipping merger will create the fourth-largest liner globally, with a market share of 7.8 percent. According to Drewry, it will allow the group to play catch up with Maersk and Mediterranean Shipping Co. at the top of the size rankings and will further concentrate control of the global fleet among the leading few carriers. The new Top 5 container lines will control around 55 percent of the active fleet and orderbook as they currently stand.

Under the new entity, container terminal operator Cosco Pacific keeps doing what it has always done, i.e. continue to focus on port investments and operations, becoming the world’s second-largest in throughput terms.

But it is not all about boxes. China Shipping Development, the former bulk division, will focus on tanker and LNG transport while offloading its loss-making dry bulk business to China Cosco Group and acquiring a Dalian tanker subsidiary.


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