• ITVI.USA
    14,237.430
    109.200
    0.8%
  • OTRI.USA
    21.810
    -0.160
    -0.7%
  • OTVI.USA
    14,212.180
    102.900
    0.7%
  • TLT.USA
    2.800
    -0.010
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  • TSTOPVRPM.ATLPHL
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  • TSTOPVRPM.CHIATL
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  • TSTOPVRPM.DALLAX
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  • TSTOPVRPM.LAXDAL
    2.040
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  • TSTOPVRPM.PHLCHI
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  • TSTOPVRPM.LAXSEA
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  • WAIT.USA
    127.000
    0.000
    0%
  • ITVI.USA
    14,237.430
    109.200
    0.8%
  • OTRI.USA
    21.810
    -0.160
    -0.7%
  • OTVI.USA
    14,212.180
    102.900
    0.7%
  • TLT.USA
    2.800
    -0.010
    -0.4%
  • TSTOPVRPM.ATLPHL
    2.290
    -0.190
    -7.7%
  • TSTOPVRPM.CHIATL
    2.760
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  • TSTOPVRPM.DALLAX
    1.320
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  • TSTOPVRPM.LAXDAL
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  • TSTOPVRPM.PHLCHI
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  • TSTOPVRPM.LAXSEA
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  • WAIT.USA
    127.000
    0.000
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American Shipper

CMA CGM plans $600 million in cost cuts

CMA CGM plans $600 million in cost cuts

   CMA CGM, the world’s third-largest container shipping company, said it had a profit of $124 million in 2008, an 87 percent drop from the $966 million it made in 2007.

   But the French carrier, which saw revenue climb 28 percent to $15.1 billion in 2008, said it was well prepared for the coming two years, “supported by its strategic vision and a plan to save $600 million in 2009.” Most of that savings will come from renegotiated vessel charters.

   “2009 is going to be a difficult year for all of us,” said Rodolphe Saad', CMA CGM chief executive vice president in an interview with American Shipper. He said the company expected revenue in the coming year to be similar or slightly down from 2008 and that the company’s focus for the coming year will be cost reduction.

   “We have taken measures in order to cope with the current situation. One of these is to adjust our capacity to the market demands. We are rationalizing and merging some of our services to follow the market demand.” In 2008, CMA CGM moved 8.9 million TEUs, 15.6 percent more than 2007.

   The company is also increasingly operating its ships at economical speeds to lower bunker fuel consumption, and campaigning for lower transit rates in the Suez and Panama canals. It said it would continue to reroute part of the fleet via the Cape of Good Hope. It has also begun renegotiating contracts with terminals and shipyards to reduce costs.

R. Saad'



   The company noted that three quarters of its fleet is chartered and that it “has significant leeway to adjust to market demand. In 2009, more than 180 ships will come out of charter and will either be returned to their owners or renewed or replaced at attractive contract rates, leading to substantial cost savings for the group.” CMA CGM said only 98 of its fleet of 395 vessels are owned.

   Saad' said he thought charters on about half of the 180 ships coming up for renewal would be discontinued, with the rest remaining in the CMA CGM fleet or being replaced with other vessels at more attractive charter rates.

   The Hamburg Shipbrokers Association Contex Index, which is based on the charter rates for containership of a variety of sizes (1,100, 1,700 and 2,500 TEUs) hit a low of 271 on April 7. February 2008 it was as high as 1,022.

   “Today charter rates are very low, as low as some of the freight rates,” Saad' said. “We try to take advantage of the current charter market conditions, but at the same time, revenue is not where it should be.

   “We hope we have reached the bottom in terms of where we stand today, whether it is on the Asia/Europe trade or others. We hope the market will pick up,” he said.



   The French carrier implemented a rate hike on many of its routes, effective April 1, and said last month it would “firmly follow the rate restoration quantum implemented by TSA (Transpacific Stabilization Agreement) members as from May 1 on the eastbound leg.” Last week CMA CGM also announced a general rate restoration on cargo moving between ports on the Mediterranean and the U.S. East Coast.

   On the transpacific, Saad' said the company “is concerned about the way the market is behaving. We are seeing extremely low rates on the transpacific eastbound and they are levels we are not willing to go to. We still need to protect our customers, but at the same time we need to be smart and not accept any cargo moving out of Asia just for the sake of filling up our capacity.”

   He said the company is forecasting a 10 percent decline in transpacific volumes, and while there has been some adjustment to capacity, there is a lot of pressure on rates.

   “We have only now started the negotiations for service contracts. We still have two months to go before the negotiations on the service contracts is over. But the initial feedback is not as good as we would have expected,” he said.

   “Whenever it is feasible for us we are renewing strategic alliances,” Saad' said. Last year, CMA CGM formed a partnership with Maersk and Mediterranean Shipping Co. on the transpacific, and in May it will expand cooperation with Maersk in the Asia/Europe trade. He noted the company is also joining forces with Maersk in the Asia-to-U.S. East Coast trade in two loops, one via the Panama Canal and one via the Suez Canal.

   “The objective behind these alliances is that we are taking delivery of large tonnage, and by having another partner we can share the risk,” he said.

   Saad' said the company has about 52 ships on order through 2012. “We have not cancelled any order, however. What we are trying to do, if possible, is delay the delivery of some ships or defer the payment of some installments.” He said shipyards will not “accept or go for every request coming from us,” but have agreed to some delivery delays.

   CMA CGM through its alliances is increasing the size of the vessels that it uses in U.S. services. It is using 8,000-TEU ships in the transpacific, and 6,500-TEU ships in the new trans-Suez string to the East Coast. “We will maintain direct calls into the U.S. and we need to use state-of-the-art vessels that allow us to remain competitive,” he said.

   “At the same time, there are small markets where we believe CMA CGM needs to maintain a strong presence,” where it uses smaller ships. These include services to Miami and the Caribbean as well as the recently launched Black Pearl service, which connects CMA CGM’s hub in Kingston with Halifax, Boston and New York.

   Saad' said CMA CGM is pursuing a policy of investing in container terminals worldwide, including the United States, where it has invested in facilities in Mobile, Miami and is looking at options in the Pacific Northwest.

J. Saad'



   The company is also investing in terminals in Malta, Tianjin, Xiamen, Odessa and Latakia, and is looking at investing in a terminal in Sao Paulo, Brazil.

   CMA CGM said it has boosted its involvement in the refrigerated cargo business and claims it is now the second-largest carrier of goods in reefer containers.

   Long term, CMA CGM said it believes trade will recover. Rodolphe’s father, Jacques R. Saad', chairman and founder of the CMA CGM Group, said he believes 'trade between Asia and especially Europe and the United States will remain inescapable and will unavoidably return to growth. 2009 will be a period of consolidation in the shipping sector and the major players will emerge stronger in the end.' ' Chris Dupin