CMA CGM bids to join box ship elite

A top five position is sought. The break has been made into the top ten. But Marseilles-based CMA CGM must still increase fleet capacity by more than 50%, without overstretching itself financially, if it is to overtake the strong players ahead of it and achieve an internal aim to be one of the world?s top five container lines.

Recent growth has been achieved through a combination of corporate M&A (merger and acquisition) activity and an aggressive newbuild strategy. This has allowed it to extend its service network and intermodal activities to give customers of the company something approaching global door-to-door coverage.

The company admits that a top five position is a long-term ambition and as such has not set a time schedule on it achieving the aim. A company spokesman says growth opportunities are being sought internally and externally. The latter, he says, will depend on what acquisition opportunities arise and how the target companies are priced. Internal growth though, through fleet expansion, CMA CGM has more control over.

New ships ordered

As part of its core development strategy, CMA CGM says it is actively pursuing a tonnage acquisition policy. To this end, it has in the past month signed a contract with Korea?s Samsung Heavy Industries for eight container ships of about 5,770 TEU capacity. These ships will have a maximum speed of 26 knots and will replace a number of smaller (4,000 TEU) and slower ships on the Asia Europe trade (focusing on Northern China), says the company. Delivery of the eight ships is scheduled for between March and December 2004.

A company spokesman says the principal driver of the order was the desire to have bigger and quicker ships on the service; ships with specifications in line with those of the company?s rivals. He admits that the timing of the order had a small element of opportunism to it also, based on the euro (8) ? dollar ($) exchange rate at the time.

The ships are reported to have cost $52.5 million each. With the euro-dollar exchange rate nearing parity this equates to about 853.5 million. At the beginning of the year, when 81 would have bought less than $0.90, this would have been nearer 859 million. Across eight ships, the saving CMA CGM can make from the strength of the Euro is a hefty 844 million.

The eight ships will enter the Asia Europe trade alongside eight 26-knot 6,600 TEU Korean-built container ships (four by Hanjin Heavy Industries and four by Daewoo Shipbuilding & Marine Engineering), delivered to CMA CGM over the course of last year. These post-panamax box ships are each fitted with a 68,470kW MAN B&W 12K98MC-C diesel engine – the most powerful in the world – and have slashed four days off the transit time the company can offer on the service.

CMA CGM also has four 2,200 TEU ships on order at Taiwan?s China Shipbuilding Corp. These ships have a large reefer capacity, which relates to their trade between Europe and the French West Indies (principally the Caribbean islands of Martinique and Guadeloupe). The company has made a charterparty commitment to three 4,050 TEU ships scheduled for delivery from Samsung next year and is in the process of taking into service two 4,367 TEU ships delivered from Hanjin Heavy Industries in the past weeks

Accelerating growth

The addition of these 17 ships would still leave CMA CGM as the eighth largest carrier even if those companies immediately ahead of it: China?s Cosco and Singapore?s NOL (incorporating APL) had no newbuilding plans of their own (which they do).

CMA CGM?s growth must therefore accelerate ahead of these two if it is to move up the capacity table. This would require it making a big play in the second hand market or making a big acquisition, in addition to it adding newbuildings. Then and only then can it think about deposing one of the big liner shipping companies in the top five: Denmark?s AP M?ller; Anglo-Dutch P&O Nedlloyd; Taiwan?s Evergreen, Switzerland-based MSC and the current number five, Korea?s Hanjin (including Senator).