‘Partnership will generate operating synergies’

The partnership between two of the biggest names in container shipping, Mediterranean Shipping Company (MSC) and CMA CGM, is a means of surviving in the current global crisis that has hit the shipping industry, according to Glenn Delve, SA marketing director of MSC. It also has to be noted that it is a tie-up between MSC, the world’s second largest container shipping group, and CMA CGM, the world’s third largest – creating a combined entity with more ships and capacity than Maersk Line/ Safmarine, the world’s present number one. The agreement, which starts in March and will initially be for two years, is in line with European competition rules. The meaning of this latter condition, according to CMA CGM executive officer, Rodolphe Saadé, is that the combined market shares of CMA CGM and MSC on the routes where they will be co-operating would be well below the threshold at which Brussels could require antitrust clearance. At this stage, the agreement involves the Asia-Northern Europe, Asia-Southern Africa and all South American trades, and is designed to substantially improve the group’s performance and generate major operating synergies. It is not a full-scale shareholding merger, but an operational one, Delve stressed, satisfying the rationalisation that is currently required in fighting off the pressures of what is a very bad year for shipping generally. This was confirmed by MSC vice president, Diego Aponte, who said that if all went well the collaboration could be extended to other routes, but stressed that this was absolutely not the forerunner of a merger. Indeed, both sides insisted that the partnership encompassed vessel-sharing or slot-swap agreements, with neither joint sales and marketing, nor collective pricing a part of the agreement. “The idea is very simple, to put volumes together in order to gain economies of scale and fill up our larger ships,” said Aponte. “The market’s current overcapacity, combined with slower demand, is impacting our financial performance,” said Michel Sirat, chief financial officer of the CMA CGM Group. An answer to the crisis, as Delve said, is the market-driven move to rationalise current shipping trades. This, according to CMA CGM, will involve rationalising lines and capacity; renegotiating vessel charter rates; implementing innovative technical solutions to improve vessel fuelefficiency and continuing to implement the ship and container asset disposal programme. The goal, according to MSC’s Aponte, is simple. To deploy the largest ships suitable for each trade lane in order to obtain the maximum efficiencies.