CMA CGM and PSA Singapore Announce Joint Venture

PSA
File image courtesy PSA Singapore

By MarEx 2016-06-15 12:57:48

On Wednesday, CMA CGM and PSA Singapore Terminals announced a new joint venture, CMA CGM-PSA Lion Terminal, for the operation of four berths at Singapore's Pasir Panjang Terminal Phase 3 and 4. The agreement will take effect later this year and will allow CMA CGM, NOL and the CMA-backed Ocean Alliance long-term access to Pasir Panjang's newest and most modern facility. Phase 3 and 4 are designed to accommodate new ultra large container vessels and their heavy cargo flows. 

“[The JV] is a significant step, demonstrating the ongoing importance of Singapore to our strategy, and delivering on our commitment to making Singapore the Asian hub for the Group," said Rodolphe Saadé, CMA CGM vice chairman and NOL chairman. 

"CMA CGM-PSA Lion Terminal will cater to the volume growth of the CMA CGM Group in Asia," said Tan Chong Meng, group CEO of PSA. "PSA looks forward to working alongside CMA CGM to ensure that its hub operations flourish, and enhance Singapore’s premier status as the world’s busiest transhipment hub.” Singapore's volume was up one percent in May, its first increase in traffic in more than a year. 

PSA International, parent company of PSA Singapore Terminals, is wholly owned by state investment group Temasek Holdings – the majority shareholder of NOL until early this month, when it transferred its shares to CMA CGM in a prearranged sale. In announcing the NOL takeover bid last year, Saadé had given his assurance that CMA would commit to a long term presence in Singapore by establishing its regional head office in the city-state and using its port as a key hub for CMA’s Southeast Asian routes. Historically Port Klang, Malaysia has been the feeder connection point for CMA’s French Asia Line (FAL) route, its busiest, and the new JV suggests that CMA – and its Ocean Alliance – may shift some portion of traffic to Singapore instead. 

The move has implications for Westports Holdings, the operator of Port Klang's container terminal, which depends on CMA for 30 percent of its volume and the Ocean Alliance members together for more than half. AmInvestment Bank announced Wednesday that it would place Westports under review based on the JV news; it suggested Alliance members OOCL and Evergreen could make up for some of CMA's volume at the port, but that uncertainty remains. 

Malaysia’s MIDF Research discounted the announcement of a shift to Singapore and said that it was unlikely CMA CGM would move much traffic away from Port Klang. It noted that while CMA intends three million TEU of capacity at Pasir Panjang, CMA CGM and NOL together have an Asia-Pacific volume of seven million TEU – meaning their ability to route large numbers of boxes through Port Klang will still be required. The analysts also noted that Westports’ fees remain significantly cheaper, roughly half the rates at PSA.