Shares in three Japanese shipping firms soared on Monday on news that they are merging container businesses with combined annual revenues of about $19 billion to counter an industry downturn.

Kawasaki Kisen, Mitsui O.S.K. Lines and Nippon Yusen said they have agreed to set up a joint venture with the combined operations to start in April 2018.

Mitsui O.S.K ended up 5.62 percent in Tokyo, having rocketed more than 15 percent in morning trade.

Nippon Yusen closed 6.43 percent higher while Kawasaki Kisen cast off most of its earlier gains to end 0.38 percent higher.

The new joint venture will create the world's sixth-biggest container shipping business, they said.

"The container shipping industry has struggled in recent years due to a decline in the container growth rate and the rapid influx of newly built vessels," hitting profitability, a joint statement said.

Kawasaki Kisen and Mitsui O.S.K will each hold 31 percent of the new firm while Nippon Yusen will own a 38 percent stake, they said.

The move comes after South Korean shipping giant Hanjin announced plans to shutter its European business, fuelling fears it could be heading towards liquidation. 

Hanjin -- the South's largest shipping company and once the world's seventh biggest -- is seeking bankruptcy protection at home and in the United States after creditors rejected a plan to deal with a $5.37-billion debt load.

Its bankruptcy would be by far the largest in the history of container shipping, which is suffering its worst downturn in six decades owing to slumping global trade and a slowdown in China.

In response to the global downturn, industry consolidation last month saw France's CMA CGM purchase Singapore's Neptune Orient Lines while Germany's Hapag-Lloyd and United Arab Shipping merged in June.

Source: AFP