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Container-shipping sector making a strong comeback, says CMA CGM

The global container-shipping sector is in its strongest position in years thanks to sweeping consolidation and stronger economic growth, leaving it well placed to withstand competition from trains on major Asia-Europe routes, France’s CMA CGM said.

Container lines, which transport everything from fresh fruit to televisions and dominate global freight volumes, are emerging from a severe downturn that culminated in last year’s collapse of South Korea’s Hanjin Shipping.

CMA CGM, the world’s third-largest container line, on Friday reported better second-quarter profits and said it expected operating profits in the second half of the year to exceed its first-half performance.

“Last year was a bad year, 2017 is a good year and 2018 should be a pretty steady one,” CMA CGM Chief Executive Rodolphe Saade, 47, told Reuters in an interview in Paris. “With the consolidation in the sector, the development of alliances and the favourable market conditions, I can’t see a crisis coming.”

Based in the Mediterranean port of Marseille, CMA CGM is controlled by the Saade family. Chairman Jacques Saade, who founded the firm in 1978 after leaving his country of birth, Lebanon, handed the CEO role to his son Rodolphe this year.

A series of major acquisitions, including CMA CGM’s $2.4 billion takeover of Singapore-based APL and market leader Maersk Line’s $4 billion deal to acquire Hamburg Sud, have curbed overcapacity. Vessel-sharing alliances between container lines have also helped cut slack. That said, consolidation in the sector has probably run its course for now, Saade said.

Demand is expected to grow by 4-4.5 percent this year, outstripping an expected 3 percent rise in supply.

Reflecting the strength of the turnaround, CMA CGM confirmed in its quarterly results that it was ordering nine new vessels, all among the largest ever built in the sector.

The ships will be built by Chinese shipyards Hudong-Zhonghua Shipbuilding (Group) and Shanghai Waigaoqiao Shipbuilding, both owned by state-run China State Shipbuilding Corporation, CMA CGM said in a statement late on Tuesday.

Saade rejected criticism that the orders risked recreating a supply glut, saying the vessels were tailored for busy Asia-north Europe routes where scale was crucial and its partners in the vessel-sharing Ocean Alliance already used extra-large ships.

Existing vessels used on Asia-Europe routes would be transferred to other markets such as the trans-Pacific, he said.

Source: reuters.com

Publication date: 9/21/2017


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