Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
CMA CGM, the world’s third-biggest container shipping group, said some of its vessels were continuing to go through the Suez Canal but warned of scheduling chaos and worried clients as attacks by Houthi rebels disrupt navigation in the Red Sea.
Rodolphe Saadé, owner and chair of the Marseille-based company, said ships that could be accompanied by a French warship were still being sent through the canal, while the rest were being rerouted around southern Africa.
“France is helping us a lot,” he told the Financial Times.
The disruption hitting the maritime shipping industry is starting to trickle through supply chains and slowing up production lines, including those of car manufacturers such as Volvo, which has halted some production in Europe because of a shortage of parts.
Attacks by Yemen’s Houthi militants on ships in the Red Sea have shrunk traffic on the route and forced many transporters to take the long detour around the Cape of Good Hope, adding two weeks to deliveries on key Asia-Europe routes.
Some rival shipping groups including AP Møller-Maersk have suspended the Red Sea route linking Europe and Asia. Hapag-Lloyd, Germany’s biggest container line, said on Friday it was not looking at the possibility of using military escorts to return to the Red Sea route.
Lasse Kristoffersen, chief executive of Wallenius Wilhelmsen, an Oslo-based company that is one of the world’s biggest operators of car-carrying ships, said he did not believe military protection would provide sufficient security to allow companies like his to return to the Red Sea route.
“The principle is that we will not go back [until] we believe there’s a safe transit and we do not think that, with the current threat in Yemen, that any military protection will be sufficient,” Kristoffersen said. “For this situation to become safe, the threat situation needs to be substantially different.”
However, CMA CGM said it was handling the matter on a case-by-case basis. It is holding daily meetings to chart the routes and plan.
“Our schedules are in complete disarray and we’re not able to stick to our timings because sometimes we’re passing around Good Hope and sometimes we’re having to wait to pass” the Red Sea, Saadé said.
He acknowledged some clients were fretting, adding: “I understand them, we’re worried too. But what we’re trying to do is to reassure them, saying it’s going to take so many days to arrive . . . so that they can organise their supply chains.”
Disruption is expected to spread even as the US and allies including the UK carry out strikes on targets linked to the Houthi groups.
“There appears to be no solution for now. We’re bracing for this to last several months,” Saadé said. That projection is shared by Maersk, which has warned that the upheaval may cause a big hit to global growth.
The shipping industry is heavily exposed to geopolitical ructions and swings in freight rates, which soared at the height of the Covid-19 pandemic when aeroplanes were grounded and ports jammed.
Armed with billions in windfall profits from that period, CMA CGM has accelerated its diversification strategy in the less volatile logistics business via multiple acquisitions.
Its latest came on Friday via its CEVA Logistics unit, which has agreed to buy Wincanton in a deal that values the British delivery and warehousing company at £765mn. The company, also focused on Ireland, has clients including Ikea and Asda.
Wincanton’s board has recommended shareholders accept the offer, which marks a 52 per cent premium to the last closing price.
The deal has been backed by roughly 7 per cent of investors in letters of intent so far, according to a London Stock Exchange filing.
CMA CGM was advised by Morgan Stanley on the deal, and Wincanton by HSBC.
Logistics accounted for roughly 45 per cent of CMA CGM’s revenues, Saadé said, although the group is yet to close its €5bn acquisition of the logistics business of French billionaire Vincent Bolloré. CMA CGM had annual sales of €74.5bn in 2022, although shipping rates came off their highs last year and revenues in recent quarters have dropped.
It has yet to publish full results for 2023.
The pivot towards logistics, a segment that is less profitable but operates with more reliable contracts with fixed prices, is aimed at bringing stability to the group. Shipping rates, meanwhile, are being pushed up again by turmoil in the Middle East.
“The Red Sea crisis — even in the worst Hollywood movies we would never have imagined this,” Saadé said.
Additional reporting by Robert Wright in London
Source: Economy - ft.com
