Penciling in the Lines

Here’s the latest headline in Port Technologies: “CMA CGM close to $ 4.6 billion debt agreement”.
And here’s the story.

“CMA CGM, the world’s third largest shipping line, is close to striking a deal with its creditors over the restructuring of its US $ 4.6 billion loans.

“Michael Sirat, the French shipper’s chief financial officer, said that a ‘deal in principle’ has been reached with 72 creditor banks and that he expects the agreement to be rubber stamped in January next year.

“Creditors have agreed to defer the company’s $ 400 million debt, due to mature in February next year, by an additional two years and have also modified CMA CGM’s loan covenants, said Sirat.

“CMA CGM’s total debt is believed to be around $ 5.7 billion, which includes $ 1.1 billion in bonds.

“Earlier this week, CMA CGM reported a $ 371 million net income for the third quarter of the year. The Marseille-based ocean carrier said that the strong quarter had been driven by a combination of higher freight rates on all trades and a better than expected result from its restructuring program.

“The third quarter profit effectively wiped out the $ 248 million deficit the company posted in the first quarter of 2012, to leave CMA CGM with a $ 301 million net income for the first nine months of the year.

“CMA CGM was also the best performing shipping line in the third quarter of 2012 with an operating margin of 13 percent. Maersk Line and Hapag Lloyd reported respective operating margins of 7.9 percent and 4.9 percent.” –

See what sharp pencils can do? The major shipping lines have been covering up declining TEU volumes throughout the world by pretending to show a profit on their bottom lines. Those lines have been laying down this smokescreen for the past five years by steadily increasing freight rates, initiating “slow-steaming” procedures, and even by laying up capacity – that’s the double-speak ship owners and operators use when they’re forced to lay up (mothball) hundreds of excess vessels.

Because one can go to the well just so often though, how many more freight rate increases do those devious pencil-pushers think consumers will swallow? And just how much more wear and tear can a vessel’s engines withstand as a result of nonsensical “slow-steaming”?

Freight increases will be the straw that breaks the camel’s back, and “slow-steaming” will eventually end the service life of a great number of container ships. But mothballing? There’s no end to that procedure, and that, or scrapping, will be the ultimate destination of all oversized container ships.