WHAT makes France-based CMA CGM, the
world’s third largest container shipping firm, still optimistic on
the weakening liner market next year?
How is this possible, in view of
crashing freight rates, especially in Asia-Europe trade, a
contraction in demand and a looming overcapacity of vessels?
The positive outlook, according to
CMA CGM, is based on its strong network and presence in China, whose
economy is still expected to grow strongly, at an estimated 7.5% to
8% next year.
The deployment of more
cost-efficient vessels in the next two years as well as the
introduction of new services will further sustain growth.
Although the projection can be
considered “too optimistic” under the current economic gloom, the
company’s top official in Malaysia reckons that although China’s
economy will see a slowdown next year, the reduced economic growth
will still be healthy.
“This is due to its huge
manufacturing capacity and large population, growth will still be
there,” CMA CGM & ANL Malaysia Sdn Bhd managing director Simon P.
Whitelaw told reporters at a shipping conference last week. “We did
not see a substantial percentage of volume drop due to our strong
network in China.”
Currently, CMA CGM has 33 weekly
services, departing every six hours from15 ports of calls in China.
CMA CGM recently announced that its
project to invest in the construction and the management of a
deepwater container terminal in the port of Xiamen, together with
its partners New World Services Holding Ltd and Xiamen Haicang
Investment General Co, has been approved by China’s authorities.
The deepwater terminal is expected
to be operational in 2010 and CMA CGM holds 30% of the joint
The port of Xiamen ranks 22nd in
the world in container traffic, with more than 4.5 million 20ft
equivalent units (TEUs) handled last year, an increase of 15% over
The group has also acquired an 8%
share in China Rail Intermodal, a project which will design, build
and manage a network of 18 railway container stations in China.
Most of the terminals are currently
under construction, and the first eight will be operating by the end
of this year.
CMA CGM is also present in the
Chinese port of Tianjin, via three berth terminals due to be
operational in 2011, under a 50-year concession agreement signed in
So, unless China is badly affected
by the global economic downturn, it will continue to support CMA
In Malaysia, the shipping group has
already met its targeted volume of two millions TEUs at its major
port of call in the country, Westports Malaysia.
By the year-end, the shipping
company should reach 2.1 million TEUs at the port, up 23.5% from
last year’s volume.
Whitelaw is expecting another
double-digit growth at the port next year.
On the impact of a worldwide
recession on the shipping industry, he said: “It is still too early
to project how badly container shipping is affected by the downturn
now. The more prevailing effect will be apparent after Christmas and
New Year celebrations.”
The peak of container shipping
usually happened in the last quarter due to the year-end global
celebrations “but, most container lines have seen a drop in volume
since the end of September,” he noted.
On the deployment of new vessels,
Whitelaw said the company would be expecting a number of vessels
next year and 2010 to join its current operating fleet of 400
vessels, of which CMA CGM owns about 100.
“These new vessels are
cost-effective where the largest will be a 13,500 TEU vessel, to be
delivered 18 months from now,” he said.
A further 79 new vessels are
scheduled for delivery between this year and 2011.
Whitelaw acknoledged that the
deployment of new vessels would flood a market already at
overcapacity, but he reckoned that the company would be ready if
trade suddenly picks up.
On falling freight rates, he said
it could not last forever.
“Shipping lines still have to make
money, have a steady cashflow to pay for the bunker oil, port
charges and other operational costs.
“There will be a limit to the fall
in freight rates and it will eventually stabilise,” he said.