Tuesday, November 20, 2012

CMA CGM announces surcharges, and makes a profit

I guess since they can't get the rate increases to stick, CMA CGM has now resorted to imposing
"surcharges" to get additional revenue. 

From The Journal of Commerce

French ocean carrier CMA CGM plans to implement "rate restoration surcharges" from Asia to Europe and Africa in the run-up to the Chinese New Year in January.
Effective Dec. 15, the carrier will impose a surcharge of $575 per 20-foot-equivalent unit from all Asian ports, including those in Japan, Southeast Asia and Bangladesh to the west Mediterranean, Adriatic, east Mediterranean, Black Sea and North Africa. It plans another $350-per-TEU surcharge on the same routes on Jan. 10.
The carrier also will impose a "Panama Canal surcharge" of 150 euros per TEU on its Panama Direct service linking Europe and the South Pacific Islands, effective Jan. 14.

And...from Reuters

* French container shipping group posts Q3 profit
* Still profitable in Q4 despite easing freight rates
* Expects bank deal in January on new debt terms
PARIS, Nov 20 (Reuters) - CMA CGM, the world's third-largest container shipping group, said on Tuesday it was on course for a full-year profit and expected to finalise a debt restructuring deal with banks in January.
The French family-owned firm has been through a turbulent three years in a freight sector under pressure from a weak global economy and oversupply of ships.
Volatility in freight has also led A.P. Moller-Maersk , owner of the world's largest container shipping firm, to cut its exposure to this business.
CMA CGM, based in the Mediterranean port city of Marseilles, said it was profitable in the fourth quarter after reporting a cumulative net profit of $310 million in the first nine months of the year.
The market was less favourable in the current quarter, however, with freight rates declining in a sign of renewed pressure from overcapacity, Michel Sirat, CMA CGM's finance director, told journalists.
"The fourth quarter won't be as good as the third quarter. It will be positive (in profits) but not as good," he said.
The company has been in talks with its banks over the past year to change its debt terms to take account of earnings volatility.

CMA CGM now expects to sign a deal in January after agreeing an outline for a debt restructuring with its main banks, Sirat said.
The deal would replace some debt covenants linked to core earnings to ones based on its balance sheet, while also rescheduling some repayments, he added.
Sirat said CMA CGM's financial position would be reinforced by an agreement last month under which France's strategic investment fund FSI is to invest $150 million, and Turkish shareholder Yildirim is to invest a further $100 million.
The group is also pursuing asset sales and plans to sell a 49 percent stake in Terminal Link, its container-terminal operator, Sirat said.
The group's previously announced cost-reduction programme had generated $550 million in savings by the end of the third quarter, ahead of a target of $400 million for the full year, the company added.
CMA CGM reported a net profit of $371 million and core earnings of $617 million in the third quarter, it said in a statement. (Reporting by Matthieu Protard and Gus Trompiz. Editing by Jane Merriman)

In my opinion things will continue to be difficult over the next few years, so there should not be too
much cheering over at CMA CGM.

Sunday, November 18, 2012

TSA delays rate increases

The Transpacific Shipping Association (TSA) is a not a conference (those are now illegal), but a
"rate discussion agreement".   Carriers who belong to it are allowed to share certain information,
and to discuss certain things regarding rates.   I am not sure what they can discuss, I think just
general things, not about specific customers.

Anyway, the administrator of the TSA keeps trying to "herd cats", getting all the carriers to
go in the same direction regarding rate increases, policy matter (ie; providing chassis), etc.
Of course if the TSA falls apart the administrator and staff will be out of a job, so they are
doing everything they can to demonstrate the need for their existence.

They have just issued new contract guidelines, delaying the previously announced rate increases
for contract negotiations.

Here it is.....

Managing Market Uncertainty
Sustained volatility in the Asia-US cargo market has delayed development of TSA's annual service contracting program for 2012-13. U.S. economic and retail indicators have remained uncertain, but suggest steady, gradual longer-term improvement in the coming year. As a result TSA lines delayed announcing a formal program of revenue/cost recovery guidelines until February 2012.
In the runup to May 1, 2012, when most new Asia-US service contracts take effect, TSA lines have recommended a schedule of interim, across-the-board rate adjustments aimed at restoring freight rates in the trade to roughly May 2011 levels, as a baseline for subsequent contract rate negotiations going forward. Interim increases include:
- US$400 per 40-foot container (FEU), effective January 1, 2012, with proportionate increases for other equipment sizes, for all tariff and applicable contract cargo.

- US$300 per FEU, effective March 15, 2012, for all tariff and applicable contract cargo.

- US$400 per FEU, effective April 15, for all remaining rates below May 2011 levels.
In addition TSA has announced its 2012-13 guideline revenue program, to take effect no later than May 1, 2012 for all carrier tariffs and service contracts.
Member lines have recommended that new baseline rates be raised by a minimum of US$500 per FEU for cargo to the U.S. West Coast, and a minimum of US$700 per FEU for all other destinations. Additional revenue and cost recovery initiatives will be considered later in the year, after a review of market conditions and outlook for the second half of 2012.

Carriers have further reaffirmed the need for 2012 service contracts to apply per formula rate increases for all equipment sizes, and to provide for collection of full, floating fuel surcharges and other applicable cost-based ancillary charges.
Finally, TSA lines indicated that they intend to apply a peak season surcharge (PSS) later in the year, with a duration and at an amount to be determined based on market conditions approaching the traditional summer and fall peak period.
The overall objective is to ensure carrier viability and service stability in a highly competitive and service-intensive freight market, by a) restoring rates to a baseline of a year earlier and then b) building on that platform in upcoming contracts to cover rising costs; to permit reinvestment in services and operations; and to provide a reasonable measure of profitability.

They say a lot more  boring things regarding how they came up with their formulas etc., trying to
convince either the carriers or their customers (or both, I guess), that they are doing a good job.

I presume what has happened is carriers have "broken ranks" on the previous agreed rate
increases and now the other carriers (through the TSA) are giving the impression the offending
carrier can now right the wrong.

What will really happen is all the carriers will try to get as much business locked up before the
new deadline, and then apologize later.

I guess they still haven't figured out it's all about supply and demand.  Rather than talking about
raising rates, they should be talking about decreasing tonnage.