PARIS • The global container shipping sector is in its strongest position in years, thanks to sweeping consolidation and stronger economic growth, leaving it well placed to withstand competition from trains on major Asia-Europe routes, France's CMA CGM said.
Container lines, which transport everything from televisions to fresh fruit and dominate global freight volumes, are emerging from a severe downturn that culminated in last year's collapse of South Korea's Hanjin Shipping.
CMA CGM, the world's third- largest container line, last Friday reported better second-quarter profits and said it expected operating profits in the second half of the year to exceed its first-half performance.
"Last year was a bad year, 2017 is a good year and 2018 should be a pretty steady one," said CMA CGM chief executive Rodolphe Saade. "With the consolidation in the sector, the development of alliances and the favourable market conditions, I can't see a crisis coming."
Based in Marseille, CMA CGM is controlled by the Saade family.
Chairman Jacques Saade, who founded the firm in 1978 after leaving Lebanon, handed the CEO role to his son Rodolphe this year.
A series of major acquisitions, including CMA CGM's US$2.4 billion (S$3.2 billion) takeover of Singapore-based APL and market leader Maersk Line's US$4 billion deal to acquire Hamburg Sud, have curbed overcapacity. Vessel-sharing alliances between container lines have also helped cut slack.
That said, consolidation in the sector has probably run its course for now, the younger Mr Saade said.
Demand is expected to grow by 4 to 4.5 per cent this year, outstripping an expected 3 per cent rise in supply. CMA CGM confirmed in its quarterly results that it was ordering nine new vessels, all among the largest ever built in the sector.
Mr Saade rejected criticism that the orders risked recreating a supply glut, saying the vessels were tailored for busy Asia-north Europe routes where scale was crucial, and its partners in the vessel-sharing Ocean Alliance already used extra large ships.
Although shipping is highly volatile, it remains the predominant means of moving goods around the world. Competition is emerging from rail, particularly with China's efforts to advance its One Belt, One Road project.
But while railways may be able to move freight from Asia to Europe in two weeks, or half the time of container ships, shipping remains far more economical and has greater scale.
CMA CGM aims to expand into land routes, seeing services along the supply chain as key to finding growth after the overhaul of the container shipping market.