CHINA's shipping giants, Cosco and China Shipping Container Lines (CSCL), plan to create the fourth-largest container line in a merger that could trigger worldwide industry consolidation, reports the Wall Street Journal.

Beijing's wants to consolidate state-owned giants in many industries to better compete with global rivals.

Discussions in China have dragged on as the companies look for a way to combine without eliminating jobs, which would make winning government approval difficult.

"The thumbs up from Beijing could come by the end of the year or in January, and a formal announcement of the merger will follow," said one informed source. "It's been a complicated matter, with the priority to avoid layoffs."

The two container shipping companies have lost US$911 million over five years, according to London-based Drewry Shipping Consultants Ltd.

Cosco operates 175 box ships and CSCL has 156, making them the world's sixth- and seventh-biggest, handling eight per cent of global volumes, putting it behind Denmark's Maersk and Switzerland's Mediterranean Shipping Co and France's CMA CGM.

Mergers now appear to be in the offing. CMA CGM and Maersk are in talks with Singapore's Neptune Orient Lines and its box carrier APL - with CMA CGM favoured to buy the company, said the Journal report.

"I think we are standing in front of a new wave of consolidation for the first time in 10 years because the market is very weak," Maersk Line CEO Soren Skou said in an interview.

China is also pressing China Merchants Energy Shipping Co and Sinotrans & CSC Holdings Co to merge some units, though talks are still at an early stage.

A combination of China Merchants and Sinotrans would double their revenue, creating a significant logistics-service competitor in China. The merged entity would also become the world's biggest tanker company, according to Citi Research.

Some analysts say consolidation among China's shipping lines won't make them more efficient or profitable, as a larger state-controlled company would have even less incentive to change.

"This is not a plain-vanilla merger of two companies, but of two large companies, where the large get larger with preferential access to cargoes and a quasi-sovereign blessing," said Basil Karatzas, whose New York-based Karatzas Marine Advisors & Co. works with some of the world's biggest shipping companies.