Dive Brief:
- The Ocean Network Express (ONE) was officially established on Friday, as Japan's top three container lines established a holding company in Tokyo and an operating company in Singapore, ahead of ONE's proposed launch date of April 2018, Seatrade Maritime News reports.
- ONE is a proposed joint venture between Kawasaki Kisen Kaisha (K Line), Mitsui OSK Lines (MOL) and Nippon Yusen Kabushiki Kaisha (NYK Line) that would create the world's sixth largest container line, if approved by regulators worldwide.
- Opening a holding company and operating office begins the carriers' unofficial integration process. So far, the European Union and Singapore have approved the joint venture, South Africa has denied it, and U.S. regulators deferred their decision over jurisdiction concerns.
Dive Insight:
The decision to open the operating and holding company shows Japan's top three container lines are not waiting on regulatory decisions to begin their integration process.
Despite regulatory concerns, the start of behind-the-scenes operations should help ease some of the inefficiencies chronic to shipping industry mergers. Whether for a joint venture or a new alliance, history has shown pre-launch coordination is pivotal in ensuring logistics are not disrupted upon the start of new vessel sailings. The simultaneous start of new alliances in April offers the most recent example, as a shift in global vessel routes caused multiple blank sailings and congestion at ports worldwide.
At the time, shippers and analysts at conferences suggested closer collaboration could have avoided the issue. However, the search for closer collaboration has also been the source of various setbacks for ONE members.
The Federal Maritime Commission ruled earlier this year it would have to defer its decision, as it could not legally approve a "joint venture," and South Africa rejected the deal based on the Japanese companies' history of collusion in the roll-on, roll-off transport market.
ONE is evidently unfazed by these concerns. It's recent actions are supported by the belief the deal is necessary given the rapid and already-approved consolidations in the shipping industry.
If approved, ONE will have only a 7% global industry share, putting it in sixth place among other alliances, based on Alphaliner TOP 100 data. Without such action, the three risk falling behind on access to lucrative East-West trade lanes, during an age when competition among the consolidated lines is extremely high. The new JV will comprise a fleet offering 1.4 million TEUs. Both K Line and MOL will hold 31%, while NYK Line will own the remaining 38% percent.
