Sunday, October 21, 2012

Update, "Will Ocean Carriers Hold the Rates"

I was looking at some of my old postings, and ran across the one entitled "Will Ocean Carriers Hold
the Rates",  quoting this from the JOC article of June 18, 2012.

RS Platou Markets analyst doubts container carriers will engage in rate war Concerns over a slump in container freight rates are overstated because lines are desperate to avoid a rate war and will suppress box slot supply to maintain profits, according to one leading expert.
Rahul Kapoor, a Singapore-based shipping analyst at RS Platou Markets, said concerns about demand were valid but he doubted whether carriers, after already booking poor results in the first quarter of this year, would resort to the same market-share-seeking pricing tactics that pushed them to the brink of collapse late last year.
“We believe the concerns of a rapid decline in freight rates from current levels are greatly exaggerated,” he said, adding that he thought carrier earnings had turned a corner in the current quarter and the industry would see modest profits over 2012.
“We do not see a sharp decline in rates as we believe that market share fights are no longer an option even for the biggest player, Maersk Line,” he said.
“Our view is that the industry cannot fund another price war, the cash buffer in 2012 is absent unlike the start of 2011 when the industry was coming out of a record 2010.”

And my comment was..  ".This is a nice thought, but somehow I don't think all the carriers are this strong willed, and as soon as one breaks rank, the others will follow.

These next 6 months will be worth watching". 

We are not yet at the 6 months mark, and already the carriers reduced rates, and finally started
once again reducing capacity.  

CMA CGM just got a cash infusuion.   Maersk is saying it will concentrate on other areas of 
their business (off shore drilling), rather than fighting for market share in container shipping.

Rumors abound that  the Chinese lines (Costco and China Shipping) will be forced to merge,
and many think it would be a good idea for the German carriers (Hapag-Lloyd and Hamburg Sud)
to merge as well.

I don't know what will happen.  But, be assured, whatever companies emerge from this economic
downturn will be lean and mean.

There might also be some really good innovations during this difficult time, and perhaps
the carriers will finally be forced to stand up to the ILA and get some decent computer systems
working on the U.S. terminals.

Well, that's enough for today.  I think things will be quiet until after the first of the year.  

Tuesday, October 16, 2012

CMA CGM receives some financial support

CMA CGM and FSI made announcements today regarding FSI's investment in CMA CGM.
As far as I call tell FSI is private investment, not from the government, but I am not postitive.
Here are the press releases.

16 Oct 2012 
CMA CGM signs of a Memorandum of Agreement with the French Fonds Stratégique d’Investissement (FSI)
October 16th, 2012 – CMA CGM, the world’s third largest container shipping Group, and the Fonds Stratégique d’Investissement (FSI), have announced today that they entered into a Memorandum of Agreement supporting CMA CGM’s future development.

The FSI will subscribe to bonds redeemable in shares for an amount of US$150 million giving right to a 6% stake in CMA CGM upon conversion.
At the same time, under the terms of the existing agreement, the Yildirim Group will subscribe to bonds redeemable in shares for an amount of US$100 million giving right to a 4% stake in CMA CGM upon conversion.

Jacques R. Saadé, CMA CGM’s Chairman and Chief Executive Officer, said: “We are very pleased to have reached an agreement with the FSI and of the Yildirim Group's renewed support. This agreement is an important milestone for our Group and demonstrates FSI and Yildirim’s level of confidence in its future. It coincides with our Group’s return to profitability in the second quarter and the expectation of an even better operating performance in the third quarter, leading to a profit for the full year.”

Rodolphe Saadé, CMA CGM’s Executive Officer, said: “This agreement will help to strengthen the Group’s balance sheet and allow us to accelerate the implementation of CMA CGM’s strategy to prepare for an IPO in the coming years. I am delighted that the FSI will invest in our Group and support its on-going development.”

The ISP is ready to strengthen the equity of CMA-CGM

October 16, 2012
Release Date: October 16, 2012
FSI announces the signing of an agreement with the majority shareholder of CMA CGM under which it plans to support the group in its development and in its willingness to go public in the medium term.
This agreement, which should be confirmed in the coming weeks, is an important step of the process involves an investment of $ 150m in the form of the ISP ORAs simultaneously to obtain an agreement with its bank group on a financial restructuring.
CMA-CGM, based in Marseille, is one of the three world leaders in container shipping. The group has experienced tremendous growth since its inception in 1996, allowing it to become a leading player in its market and to be present on all major routes.
The Group employs 18,000 people including 4,300 in France and is known for its operational efficiency.
The cyclical nature of the shipping business leads CMA-CGM renforcerson to adapt and balance in order to consolidate in the coming years its leading position in this market.