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July10, 2017

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MAERSK-HIT CYBERATTACK RATTLES INDUSTRY TH E I NTE RNATIONAL C YB E R AT TACK t hat paralyzed Maersk Group's computers has left customers of the world's largest ship- ping line anxious for answers and wondering whether the June 27 attack was a one-off or a harbinger of more trouble. The attack was reported to be caused by the "Petya" ran- somware. Experts said it resembled another recent assault that crippled thousands of machines worldwide. The latest attack dis- abled most APM Terminals in the United States and globally. Ironically, Maersk has been in the forefront of efforts to increase digitalization of data as part of a broad push to make container shipping more efficient. Recently, Maersk announced a "Remote Container Management" initiative to pro- vide shippers with 24/7 data about their refrigerated container shipments. An issue certain to receive extensive discussion in the days ahead is how companies can pro- tect themselves from cyberattacks. As the shipping industry pushes harder to digitize its operations in a quest for productivit y and efficiency, the attack has put a focus on cybersecurity. US ports currently receive $100 million annually in port security grants from the Federal Emergency Management Agency. Ports would like to see more, partic- ularly as the risk of cyberattacks rises. Susan Monteverde, vice president for government relations at the American Association of Port Authorities, said the House Transportation and Infrastructure Committee had recom- mended $200 million, and that cybersecurity was a priority for the program. "We're hope- ful the appropriations committee will say this should have at least level funding," she said. "Our goal for years now has been this program needs at least $400 million." While these funds could not have prevented what happened to Maersk on June 27, the cyber- attack underscores how essential it is to ensure that the data and IT systems of US ports, shippers, and transportation provid- ers are secure. IS A COSCO-OOCL MERGER AHEAD? RUMORS SURROUNDING A Cosco-OOCL tie- up refuse to go away despite repeated denials by both carriers. However, if the price were right and the China and Hong Kong lines did come together, a formidable new global entity with the third-largest mega-ship f leet and the second-largest mover of US containerized goods would be created. Based on US container volume in 2016, a merged line would give Medi- terranean Shipping Co. fiercer competition for market share by handling 9.9 percent of all of US exports and imports. MSC controlled 11.9 percent of conta inerized volume la st year, while third-place Maersk Line handled 9.4 percent of volume, according to an analy- sis of PIERS, a sister product of The Journal of Commerce within IHS Markit. Cosco and OOCL were the sixth- and seventh-largest mov- ers of US containerized cargo, respectively, in 2016, with 5.26 percent and 4.65 percent shares. In terms of shares of US imports in 2016, OOCL ranked No. 9 (4.5 percent) and Cosco No. 6 (6.3 percent) as the former's volume rocketed 30.2 percent year over year and the latter's volume jumped 14.6 percent. A merged car- rier would be the second-largest mover of US container imports, with a share of 10.8 percent share, according to PIERS. OOCL ranked No. 6 (5 percent) among carriers moving US exports in 2016, while Cosco ranked No. 11 (3.5 percent). Year over year, OOCL's volume of US exports rose 16.9 percent, and Cosco's volume jumped 39.8 percent in 2016. A merged carrier would have been the third-largest mover of US exports last year, with a share of 8.5 percent. Cosco has 49 vessels with capacities of more than 10,000 TEU, while OOCL has 15 such ships, potentially resulting in a merged fleet of 64 mega-ships, according to the IHS Markit orderbook. MSC has the largest mega-ship fleet with 85 such ves- sels, followed by Maersk with 72 mega-ships. The ranking could change as more carriers receive mega-ships. Long-running speculation that Cosco would announce its plan to acquire OOCL from Orient Overseas (International) Ltd. on July 1 — to mark the 20-year anniver- sary of the United Kingdom handing over Hong Kong to China — mounted after Cosco Shipping Holdings temporarily suspended trading of its stock May 17. The mainland's major carrier said in an exchange filing that the share suspension was because of "material asset restructuring," but it did not explain further. Citing unnamed sources familiar with the matter, The Wall Street Journal said the merger could close as Spotlight 6 THE JOURNAL OF COMMERCE www.joc.com JULY 10.2017 6 THE JOURNAL OF COMMERCE www.joc.com

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