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Neptune Orient Lines Ltd., the shipping company controlled by Singapore’s sovereign wealth fund, is seeking to borrow at least $5 billion for a potential bid to buy TUI AG’s sea-cargo unit, people familiar with the deal said.

Southeast Asia’s largest sea cargo carrier is in talks with lenders to raise between $5 billion and $6 billion, said three people, who declined to be identified because the information isn’t public. Paul Barrett, spokesman for Neptune, which is 66 percent owned by Temasek Holdings Pte, declined to comment.

Neptune will be competing with Alecta, a Swedish pension fund, M.M. Warburg & Co., the German city-state of Hamburg and billionaire Klaus-Michael Kuehne for Hapag-Lloyd, the shipping unit of TUI. A tie-up between Singapore-based Neptune and Hapag- Lloyd will create the world’s third-largest container shipping company, allowing it to cut costs amid record fuel prices.

“There’s increasing pressure for container operators to control costs in an environment where bunker fuel prices keep rising,” said Jack Xu, an analyst at Sinopac Securities Co. in Shanghai. “Mergers and acquisitions is one way to cut costs. Bigger entities will do better in situations like this.”

Neptune fell 2.4 percent to S$3.21 as of 3:20 p.m. in Singapore. The stock has declined 18 percent this year on concern bunker fuel prices, which have risen 31 percent, and the slowing demand from the U.S. to move sea cargo, will reduce earnings.

Hapag-Lloyd is ranked fifth by capacity, while APL Ltd., Neptune’s shipping unit, is eighth, according to Containerisation International.

Maersk, Mediterranean Shipping

A combined company would have capacity to carry more than 880,000 twenty-foot equivalent boxes, putting it behind Maersk Line, the shipping division of A.P. Moeller-Maersk A/S, and Mediterranean Shipping Co., according to Containerisation International data.

TUI, formed through mergers between marine and tourism assets, gave in to investor pressure in March and said Hapag- Lloyd would probably be sold after months of reported interest from Temasek, Singapore’s sovereign wealth fund.

Der Spiegel reported that TUI wouldn’t promise Temasek control. Germany may join the U.S., whose lawmakers forced Dubai’s DP World to sell terminals in 2006, in blocking a foreign attempt to control port assets.

Hamburg’s government said in April that the port city might consider buying the shipping line to protect jobs. Hanover, Germany-based TUI, Europe’s biggest tour operator, is seeking a buyer for Hapag-Lloyd, which analysts have said may be worth 5.4 billion euros ($8.4 billion). Reuters and Dow Jones reported earlier this year that Singapore’s Neptune is interested.

Hapag-Lloyd Profit

TUI is forecasting an almost 70 percent increase in 2008 earnings at Hapag-Lloyd, Financial Times Deutschland reported, citing the sales prospectus.

Hapag-Lloyd’s adjusted full-year earnings before interest, taxes, depreciation and amortization are expected to reach $788 million, as revenue climbs 20 percent to $9.7 billion, the newspaper said. For 2010, Hapag-Lloyd’s adjusted Ebitda is expected to rise to $1.3 billion on sales of $11.7 billion, the newspaper said on June 20.