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The decision of the South African Competition Commission to block the merger of the container businesses of K Line, MOL and NYK is “not expected to have a significant impact” on the consolidation of the Japanese carrier trio, according to Alphaliner.
It said that, notwithstanding a likely intention to appeal last week’s ruling, the proposed One Network Express (ONE) could decide to quit the South African market when it commences operations next April, with minimal damage to its business.
However, with spot freight rates on the Asia to South Africa route having surged to a seven-year high, the new entity could be be reluctant to walk away from an increasingly lucrative trade.
Alphaliner said that of the three carriers, only K Line and MOL offered container services to South Africa, and ONE’s combined market share was relatively low compared to its competitors.
For example, on the key Asia-South Africa tradelane, K Line and MOL’s share of the capacity on the route is just 12%, compared with the dominance of Maersk Line and MSC’s combined share of over 50%.
The two Japanese carriers operate within a vessel-sharing agreement (VSA) with Evergreen, Cosco and PIL on this trade, offering two weekly services deploying 13 ships of 4,200-5,600 teu, of which the Japanese lines contribute five vessels.
MOL also offers a South Africa-Asia northbound service via a slot charter with Maersk and MSC and is a vessel-providing VSA partner with Maersk, Safmarine and DAL on a liner service linking Europe with South Africa.
In last week’s ruling, the SA commission said it had “considered the impact of the proposed transaction” on the provision of container services and, moreover, “the impact of the proposed transaction on the adjacent market of the car carriers”, the business of which is not included in the merger.
“The commission also found that the proposed transaction creates a platform for coordination in the car carrier market which has a history of collusion involving the merging parties,” it said.
It concluded that “there are no efficiencies” and “no public interest issues” that “outweigh the anti-competitive effects arising from the proposed transaction”.
Alphaliner expects that the Japanese carriers will make a strong case to appeal the decision, but for now the trio are refusing to discuss the issue, clearly not wanting to prejudice the outcome.
However, one source told The Loadstar the three lines were “not unduly concerned” about the South African ruling and that plans were “well on track” to merge the businesses.
Ideally however, he admitted, it would be better if ONE could get the green light from the South African authorities.
Indeed, the Japanese lines will want to avoid a “contagion effect” of knock-backs from other regulators around the world, which would have a serious impact on the business of ONE.
A decision is still awaited from US regulators after the Federal Maritime Commission (FMC) last month decided it could not rule on the merger proposals and referred the matter to the US Department of Justice.