Mediterranean Shipping, CMA CGM Start Container Partnership as Rates Fall
Mediterranean Shipping Co. and CMA CGM SA, the world’s second- and third-largest container lines, agreed to a vessel-sharing accord meant to fight falling rates as overcapacity makes the industry unprofitable.
The deal includes cooperation on Asia-Northern Europe, Asia-Southern Africa and South American routes, Marseille, France-based CMA CGM said today in a statement.
The partnership will compete with industry leader A.P. Moeller-Maersk A/S, which in September merged some of its Asia to Europe trades into a fixed daily service with a fleet of 70 ships. Maersk has said it is prepared to outlast rivals as the industry faces four years of overcapacity, and will reduce prices to preserve market share.
“The partnership is a result of the incredible tough competition we see in the container market with falling rates and overcapacity,” Janne V. Kjaer, a transport analyst at Silkeborg, Denmark-based Jyske Bank A/S, said by phone. “The industry will have more of these partnerships going forward as the market conditions force container lines into action.”
Maersk’s Copenhagen-based container unit has a global market share of 15.8 percent, according to estimates released today by Alphaliner. MSC, based in Geneva, has 13.2 percent and CMA CGM has 8.5 percent, according to Alphaliner. The smaller rivals are closely held.
“The agreement, which is designed to improve the two partners’ respective performance, will help to drive extensive operating synergies and enhance quality of service,” CMA CGM said. The companies will be able to “deploy the best ships in each of their fleets, while increasing the number of ports of call and frequency of sailing.”
Maersk Prediction
Maersk’s container unit last month lowered its full-year forecast to a net loss from an August prediction of a “modest” profit. The unit lost 1.58 billion kroner ($287 million) in the third quarter versus a 5.9 billion kroner profit a year earlier.
“It’s not unlikely that we will see some container lines going out of business in this unprofitable market,” said Jyske’s Kjaer, who has a “buy” recommendation on Maersk shares.
Maersk declined 580 kroner, or 1.5 percent, to 37,220 kroner at 3:46 p.m. in Copenhagen. The stock has lost 26 percent this year.
To contact the reporter on this story: Christian Wienberg in Copenhagen at cwienberg@bloomberg.net
To contact the editor responsible for this story: Chad Thomas at cthomas16@bloomberg.net
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