By Brenda Goh

SHANGHAI, Feb 18 (Reuters) – China on Thursday launched a problem to international shippers AP Moller Maersk and Mitsui OSK Lines, however analysts mentioned the enormous firm should slim down its workforce and order e book to climate one of many business’s worst-ever slumps.

Created from the state-driven merger of former rivals China Ocean Shipping (Group) Company and China Shipping Group, China Cosco Shipping Corporation (COSCOCS) will management one of many world’s largest fleets of dry bulk vessels, container ships and oil tankers.

Its debut, nevertheless, coincides with a number of the leanest occasions for transport corporations already mired within the longest downturn in three many years: maritime consultancy Drewry forecasts the worldwide container transport business will make a mixed lack of $5 billion this 12 months attributable to lacklustre freight charges and cargo volumes, ship lay-ups and better working prices.

“Few liner companies are set up at the moment to handle current challenges. Perhaps the first challenge is to shrink the new combined company. Without that, the bleeding will continue at a faster pace,” mentioned veteran transport analyst Charles De Trenck.

Shipping corporations have endured years of losses because the international monetary disaster introduced the transport growth to an finish, as new vessels ordered earlier than the downturn created an oversupply and depressed freight charges to document lows.

At the COSCOCS launch occasion, firm chairman Xu Lirong acknowledged the business was experiencing its worst downturn since 2008 and mentioned mergers had been key to using out droop.

However, he mentioned COSCOCS had instructed workers that there could be no wage cuts or layoffs, a coverage of many Chinese state-owned corporations however which business insiders mentioned made little sense.

“To me they’re missing a huge opportunity there to improve their competitiveness,” mentioned a China-based transport government at a rival agency, who wished to stay nameless as a result of sensitivity of the matter.

COSCOCS presently make use of 180,000 employees, greater than double the workforce of Maersk.

It additionally owns 830 vessels together with container ships, dry bulk vessels and tankers, nearly twice the mixed fleet of Maersk and Mitsui O.S.Ok Lines, in line with knowledge from ship valuation agency VesselsValue, which doesn’t have in mind chartered-in vessels.

COSCOCS’ sheer dimension works to its benefit because it permits it to raised compete for market share than if it had remained two separate, loss-making corporations, consultants mentioned.

“The merger gives them a fighting chance,” mentioned Shanghai-based Essence Securities analyst Jiang Ming. “If they didn’t merge the status quo would have remained the same.”

The merger, nevertheless, threatens the present make-up of vessel-sharing alliances on container routes, which corporations entered to decrease prices, these consultants added.

COSCOCS launch comes two months after CMA CGM proposed to purchase Singapore’s Neptune Orient Lines for $2.4 billion, within the biggest-ever acquisition by the French container transport big to assist it to trip out the extreme downturn.

“While the latest mergers should further consolidate market share, pricing competition typically intensifies post mergers, based on prior experiences,” Deutsche Bank analysts Sky Hong and Joe Liew mentioned in a analysis notice revealed on Monday. ($1 = 6.5176 Chinese yuan renminbi) (Additional reporting by Keith Wallis in SINGAPORE; Editing by Miral Fahmy)

(c) Copyright Thomson Reuters 2016.