CMA CGM Cancels West Coast ULCV Service
CMA CGM has confirmed reports that it will not be deploying ultra-large container vessels like the CMA CGM Benjamin Franklin on regular trans-Pacific runs.
A spokesman for the line cited the "current trans-Pacific market situation" in comments to the Wall Street Journal. Eastbound trans-Pacific spot rates have fallen to $750-$800 per forty-foot unit, roughly half the rate two years ago.
CMA CGM is just starting new a carrier alliance with COSCOCS, OOCL and Evergreen, which will begin operations next year (subject to regulatory approval). At least one of these partners – OOCL – has already seen revenue suffer in recent months despite increasing volume, thanks in part to falling rates on oversupplied Asia-U.S. West Coast routes. The addition of six 18,000 TEU vessels calling at Los Angeles / Long Beach would have made the overcapacity problem worse for carriers and alliances, analysts said.
Separately, EU antitrust regulators are set to give final approval to CMA CGM's $2.4 billion takeover of Neptune Orient Lines. The approval follows after the French shipping group agreed to pull NOL out from the rival G6 shipping alliance, two people familiar with the matter told media on Thursday.
Meanwhile, in South Korea, embattled container carriers Hanjin Shipping and Hyundai Merchant Marine are moving towards restructuring.
Hanjin's chairman Cho Yang-ho has stepped aside, the Korea Times reports, and the board is working towards a creditor-led restructuring plan. The line owes its backers some $5 billion in debt, $430 million of it coming due in the first half of 2016. Korea Development Bank and the line's other creditors are weighing a "self-rescue" restructuring plan from the line, which calls for rolling over or rescheduling its maturing debts.
Hyundai Merchant Marine appears set to become a subsidiary of major creditor Korea Development Bank, which, together with a consortium of the line's other lenders, are preparing to execute a debt for equity swap and take possession – instead of allowing it to enter court receivership. Foreigners who purchased the line's convertible bonds have reportedly been following suit in recent weeks, trading in for shares instead.
A government official told Business Korea that the deal was dependent on settling new arrangements on charter rates with the owners of HMM's chartered-in vessels – a major hurdle for the line to date.
Observers say that the decision is due in part to shipping alliance negotiations, and is intended to give HMM a firmer footing going into alliance talks for next year.