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  22nd December 2008 - STAR MARITIME
 

CMA CGM to ride on strong network, China

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 venture.

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 2006.

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 August.

So, unless China is badly affected by the global economic downturn, it will continue to support CMA CGM’s growth.

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.

 

   
 

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