A potential merger between the China Shipping Group Co and the China Ocean Shipping Co could shake up the global shipping market, according to a pair of maritime experts.

"There have been plenty of signals that this has been coming across," said Mark Szakonyi, executive editor with JOC.com, the Journal of Commerce website. "It's a merger that makes sense on multiple levels.

"Both companies have been propped up by financial subsidies from the government, and that's kind of pushing the merger," he told China Daily. "They're losing money because of overcapacity and the bad freight-rate market, so this is a way to possibly turn around their fortunes."

Basil Karatzas, president and CEO of Karatzas Marine Advisors & Co, a New York-based shipping finance and advisory firm, said: "The freight market is at a 30-year low, and a lot of ship owners are fighting for survival. Too many ships have been ordered and been built, and the world economies are not growing fast enough to absorb those vessels.

"So the state of the shipping market is very weak, and quite a few people, including major name private-equity firms, are calling for the market to consolidate," Karatzas added. "The overall theme of the industry is consolidation, and now you have these two big companies from China that are discussing a merger."

A deal could receive approval from the Chinese government as early as January, according to a Nov 18 report in The Wall Street Journal. China Shipping Group Co (CSG) and China Ocean Shipping Co (Cosco Group) have been working privately on a deal for several months.

The agreement has focused on a transaction involving the two companies' container-shipping units, sources told the Journal, but there is also interest in combining the two firms' other operations, including port operations.

Depending on which units are combined, the total value of the merger could exceed $20 billion, the Journal reported.

Szakonyi told China Daily the notion of a deal between the two companies has been a hot topic in recent years, especially because the companies suspended trading of their respective stocks earlier this year.

A merger of the two state-owned shipping conglomerates would create the world's fourth-largest container-shipping line, according to data from Alphaliner, a global maritime research firm.

"They would be the largest mover of goods from China to the US," Szakonyi said. "That's significant when you look at China, which might not want European carriers being the primary mover of their goods to the US."

Cosco maintains a fleet of 175 container vessels and CSG operates 156 container ships, making them the world's sixth- and seventh-largest container shipping companies, respectively, in the world.

The two groups handle about 8 percent of global shipping volume, the Journal said.

If completed, the merged company would trail only Denmark's AP Moller Maersk Group, Switzerland's Mediterranean Shipping Co and France's CMA CGM SA.

Karatzas said a potential merger would create a company "able to compete with names like Maersk and everybody else".

"They would have a ‘quasi-sovereign' blessing, and preferential treatment in financing and shipbuilding," Karatzas told China Daily. "To say the least, they would also have preferential access to cargoes and companies that will be sending their products to the Western world."

Szakonyi said: "Maersk, which is the No 1 line, and CMA CGM, the No 3 line, are both in talks to acquire Neptune Orient Lines. What you have here is a lot of the bigger carriers are finally looking to acquire others, so this Cosco and China Shipping deal is not happening in a vacuum.

"They're seeing the potential for other people getting bigger, and that may be adding some momentum toward their path toward merging as well," Szakonyi said. "The mood in the industry is not so much if this will happen, but rather when and what will it look like."

China Shipping has expanded operations since its founding in 1997. China Shipping North America (CSNA), established in 2000, was the first US company set up by CSG.

Operations in the US include a regional headquarters in New Jersey, and branches in Chicago, Los Angeles and Houston. The company also has a salesforce of more than 200 in Atlanta, Dallas and Seattle.

Cosco, which was founded in 1961 in Beijing, has seven companies listed under its network, including more than 300 local and overseas subsidiaries.