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China's top two shippers join forces in domestic container trade

HONG KONG, Oct 12 (Reuters) - China's top two shipping giants, China COSCO and China Shipping, will join forces in a move that is a first for the domestic coastal container shipping industry and which is aimed at weathering a severe market downturn.

China Shipping Container Lines Co Ltd (CSCL) said it had agreed with COSCO Container Lines Co Ltd, a unit of China COSCO Holdings Co Ltd , to jointly operate trade routes from north and northeast China to Fujian and Shantou in the southern province of Guangdong from mid-October.

The two shippers, with a combined market share of 80 percent in the domestic coastal container trade, would each deploy ships to jointly operate the routes, CSCL said.

"This move is just the start of an intensive cooperation in domestic container shipping between CSCL and COSCO," CSCL said in a statement released on Friday.

Global container freight rates have been battered by a slowing global economy and supply glut last year. Rates have, however, rebounded in the second quarter on rising U.S. demand and shipping firms' determination to cut excessive capacity.

"Hopefully this cooperation can provide stability to domestic coastal shipping rates," said Geoffrey Cheng, an analyst at BOCOM International.

Shares of both CSCL and China COSCO have outperformed the broader market in the past five weeks, and were nearly 30 percent from their year low on September 5. The blue chip Hang Seng Index was up 10 percent in the same period.

Shares in China COSCO, which also operates the world's largest dry bulk cargo fleet, are still down around 6 percent so far this year, while CSCL's stock has been flat.

(Reporting by Alison Leung; editing by Miral Fahmy)

((alison.leung@thomsonreuters.com)(+852 2843 6369)(Reuters Messaging: alison.leung.thomsonreuters.com@reuters.net))

Keywords: CHINA SHIPPING/