By Li Xiaochuan

On December 10, 2015, the overall reform program of COSCO China and Shipping Group was approved by the State Council,the new group was named “China COSCO Shipping Group Co., Ltd.". On December 7, 2015, CMA CGM,the world's third largest shipping company announced that it had purchased NOL with $2.4 billion, which indicated that 2016 would usher in a full-scale merger drama.

In the fourth quarter of 2015, after a 3E type container ship of 18000 TEUs is put in idle, the world's largest tycoon Maersk broke news again that it would cut

expenditures on a largescale, including the reduction of at least 4000 employees around the world, and give up and delay more than 10 new ship alternative orders.Undoubtedly, the information hinted to the whole industry that in 2016 and subsequent years, the imbalance situation between supply and demand would continue. On August 1,2016, the Shanghai Shipping Exchange announced that the China Containerized Freight Index closed at 734.95, for the weak cargo market, the industry can not see any signs of improvement. So, people are worried that the price index in this year would create a new lowest record in history.

The shipping industry has been in downturn for a long time and the shipbuilding industry is still in hard time. As the manufacturer of shipping industry chain, the shipbuilding industry should speed up to reduce production capacity. On one hand, ordering ship irrationally will have double negative effect on the market and the industry itself. Scorpio Bulkers,the shipowner in Morocco, who once led the wave of ordering ships is a typical representative of a new round irrational market "prosperity" in 2013. At the end of 2015, Scorpio Bulkers sold its last three capasize bulk carriers of 11 years to Angelicioussis Group in Norway, and announced to withdraw from the Capesize market. The selling price of these ships has shrunk dramatically compared with their initial cost, in the face of the slump in the market situation and its dismal performance, Scorpio Bulkers had to sell property to reduce losses.

Suffering from overcapacity, since 2015, Chinese shipbuilding industry has seen news of bankruptcy and reorganizationone after another. Four shipbuilding enterprises including Oriental heavy industry, Judger shipbuilding, Zheng He shipbuilding and Ming De heavy industry in Jiangsu and Zhejiang province went bankrupt. Moreover, Ming De heavy industry has been auctioned on Taobao website. Entering 2016, the start of dry bulk shipping market is not preferable, and adversely influenced by Capesize sector, the BDI index (Baltic dry bulk index) accelerated its decrease. On January 7,2016, BDI index closed at 445 points, breaking the lowest record in history again. This indicates there is no sign of recovery from the depression. The report, released by Shanghai International Shipping Center on January 5, 2016, pointed out that in 2016,the bankruptcy reorganization of shipping industry may be triggered at any moment.The operating pressures of Chinese shipping companies in the first quarter of 2016 will continue to increase, dry bulk shipping companies will become the fuse of the bankruptcy wave.At present, the comprehensive integration of resources is regarded as the necessity for the development of the shipping, shipbuilding, brokerage, offshore engineering,transportation, and supporting industry. Now we can see clearly a new round of merger and acquisition tide is approaching.

Analysts pointed out that in the new normal economic situation, one of the most important tasks for shipping industry at present is to fully play a role in market function to resolve the excess capacity, speed up structural adjustment, promote the transformation and upgrading. Indeed, more and more industry professional person appeal and advocate to make more shipowners,operators and partners consider “merger", so as to improve efficiency and reduce expenditure. However,between M&A and market upheavals, it seems diff i cult to say who will bring success to whom. For enterprises themselves, mergers and acquisitions can also be regarded as means to become big and strong. Zhang Ye,President of Shanghai Shipping Exchange, said: "this is probably the “l(fā)ast supper” before the forming of the new market pattern". At present, the supply side is relatively stronger, but this will not bring innovation to the industry until the overcapacity has affected the "body"of the industry.