Saade predicts tough times for boxships

CMA CGM chairman Jacques Saade has become the first shipowner to publicly voice concern about container shipping prospects, warning that the liner sector can expect to suffer from the effects of economic slowdown for the next 18 months at least.

Mr Saade also ruled out a bid for Hapag-Lloyd, the German line that is up for sale.

His comments on market prospects coincide with growing unease about trade conditions as anecdotal evidence of a slowdown grows.

The industry is buzzing with talk that latest attempts to raise freight rates in the Asia-Europe trades are struggling, with the Far Eastern Freight Conference’s July 1 restoration effort reportedly meeting a lukewarm response as ship utilisation levels slip. That gives shippers the upper hand in rate negotiations, although the final outcome of the latest round may not be clear for another couple of weeks.

With lines in the red on the depressed eastbound Pacific corridor, the westbound Asia to Europe route has been the main moneyspinner for global carriers in recent months.

But with cargo growth falling, Mr Saade said that his group’s profits would be down this year, following a decline in vessel load factors on its Asia-Europe services and a reduction in average freight rates from $1,500 to $1,300 per teu in recent months.

He revealed that ship occupancy on its Asia-Europe services had dropped from 100% last year to 94% this year as a result of rising oil prices and reduced consumer spending in Europe.

The world was experiencing a “real economic slowdown”, he said. “It is a latent crisis which will take time to disappear. I do not see an improvement before the end of 2009.”

Industry sources said the real test of current underlying conditions will come in about a month’s time when ships start loading cargo in Asia for the traditional pre-Christmas peak season. Only then will lines know whether the trade really is cooling or just suffering a temporary slowdown.

But Mr Saade seems in little doubt. In an interview with France’s Le Figaro newspaper, he said shipping was being particularly hard hit by soaring fuel prices, with bunker costs currently representing 60% of voyage costs.

He described the recent surge in oil prices as “fictitious”, and called on governments to take action to counter it.

Mr Saade said that group profits would fall even though the arrival of new ships would enable it to achieve a substantial reduction in slot costs. He did not attempt to put a figure on the reduction, however, which will follow its 58% increase in net income to $966m last year.

Mr Saade also indicated that CMA CGM was not planning to acquire new shipping companies, and ruled out a bid for Germany’s Hapag Lloyd.

“We are not buyers,” he said, signalling that the group wanted to concentrate investment efforts on the acquisition of port concessions. “Ports have become a necessity for shipowners. We cannot allow ourselves to have ships waiting.”