Who will buy? It is a refrain from a song that gets stuck in one’s brain and keeps playing over and over. In the shipping industry’s uncertain world of mergers and bankruptcies, the refrain, Who will buy? Who will buy? plays on the mind of all involved in the global supply chain.
With apologies to songwriter Lionel Bart and the play Oliver, the question is especially acute for terminal operators.
It seems everything is for sale as the container shipping industry ROIs (return-on-investment) bump along the bottom like a dragging anchor that can’t catch hold.
The bankruptcy of South Korean carrier Hanjin (not to mention the near bankruptcy of fellow Korean carrier Hyundai Merchant Marine), the merger of COSCO and China Ship, the sale of Singapore’s NOL/APL to the French carrier CMA CGM and the newly-announced merger of the Japanese big three (MOL, K-Line and NYK) carriers’ container divisions in 2018, all reflect an industry in distress.
Sounds bad. But one man’s distress is another’s opportunity and for many containership operators the gem in their portfolio of assets is the terminal facilities. The trouble with terminal facilities is that the reshuffling of lines also means the reshuffling of alliances, services and ultimately ports of call.
Take for example the ensuing deals after the June CMA CGM acquisition of NOL and the Singapore carrier’s APL subsidiary. NOL was essentially Singapore’s national carrier, and indeed the biggest shareholder was Temasek at 67%, the Singapore government’s investment vehicle. Thus it was no surprise that CMA CGM and PSA Singapore Terminals announced the establishment of a terminal joint venture. The company named CMA CGM – PSA Lion terminal PTE Ltd (“CPLT”) is owned in proportions of 49% and 51% respectively, and will lease and operate four container berths in the Port of Singapore. Naturally, PSA is 100% owned by the aforementioned Temasek, so the divestiture is matched by an investment by the buyer CMA CGM.
While the move will certainly help the Port of Singapore, as indicated above, for all the winners there are losers. In this case, the principal loser from the CMA CGM transaction will be Port Klang, currently the carrier’s Southeast Asian hub, and its main operator, Westport (see chart on page 4). Around 20% of Port Klang’s throughput is CMA CGM related. But the move could become even more significant with Evergreen joining CMA CGM, COSCO and OOCL in the new version of the Ocean Alliance, scheduled to start next April.
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