Cosco had to surrender key terminal to bag US approval
![Photo: Ritzau Scanpix/Nick Ut](https://photos.watchmedier.dk/watchmedier/resize:fill:3840:0:0/plain/https://photos.watchmedier.dk/Images/article10541807.ece/ALTERNATES/schema-16_9/cosco-longbeach.jpg)
Chinese Cosco breathed a sigh of relief the other day when the company secured the crucial and final approval for its acquisition of the parent company of Hong Kong-based carrier Orient Overseas Container Line (OOCL), OOIL, from US regulators.
But the approval came at a price, writes Alphaliner in its latest newsletter. And not just any price.
On Friday July 6, the parties secured final approval for the Committee on Foreign Investments in the United States, on the same day as Cosco's deadline for submitting the final paperwork for the acquisition of OOIL's shareholders.
"However, Cosco had to pay a high price to secure the US' approval, as the shipping line was forced to sell OOCL's Long Beach Container Terminal (LBCT)," writes Alphaliner.
The container terminal has been at the center of US authorities' concerns for national safety, which at an earlier stage threatened to end the Chinese liner companies' merger plans. But in the deal with the Americans, Cosco and OOIL agreed to sell the terminal to a third party, temporarily handing over ownership to a US-based fund established for the purpose of operating the terminal in the interim period.
An extraordinary terminal
It has taken almost six months to reach a compromise, with the US request having waited since January this year. And even though the approval has now been secured, there are still challenges for Cosco going forward, according to Alphaliner.
"It will not be easy for Cosco to find a suitable buyer that will ensure that the carrier's economic interests are protected. The modern LBCT is (was) a critical component of OOCL's transpacific expansion strategy and ceasing control of the terminal appears to be a major setback for Cosco."
Cosco currently controls two other terminals in the Los Angeles-Long Beach port complex. But OOCL's LBCT has a concession that runs until 2051, and it is, without comparison, the longest concession contract among container terminals in the San Pedro Bay region. One of Cosco's current Pier F contracts runs until 2022.
Additionally, LBCT is the most advanced container terminal in the US and its annual capacity is expected to reach 3.30 million teu once fully developed in 2020 or 2021, reports Alphaliner.
"Such capacity would allow LBCT to accommodate the combined volumes of COSCO and OOCL in the key Pacific Southwest market," writes the firm.
Cosco announced its acquisition of OOCL close to a year ago. The transaction catapults Cosco up as the world's third-largest liner shipping company, and the acquisition has also led to backstage murmurs about how much of the global container market the Chinese state, through Cosco, plans to control.
English Edit: Daniel Logan Berg-Munch
Related articles
Cosco gets US approval for OOIL acquisition
For subscribers
Cosco lands crucial approval for giant merger
For subscribers