JOC: Once-rescued CMA CGM now ‘too big to fail’: Yildirim

JOC‘s Mark Szakonyi reports:

Nearly a dozen years after rescuing CMA CGM and enjoying billions of dollars in windfall, Robert Yildirim says the Marseille-based company is now “too big to fail.”

Insulated with $10 billion in net cash and diversification into logistics and air cargo, CMA CGM Group is on far higher ground than 12 years ago when he took an initial 20 percent share, said Yildirim, the CEO and president of Yilport Holdings. CMA CGM and the larger container shipping industry are well-poised to keep profits up through a slowdown in global container volumes in the fourth quarter and into next year, he said. There has been a structural shift on capacity management in the industry, enabling it to manage an expected slowdown in volume growth in 2023, Yildrim said.

“Once [the container lines] understood how to control the prices and the supply and demand balance, they won’t spoil it and fight and reduce rates,” he said.

The days of when “some [carriers] got carried away and made stupid decisions because of ego,” may be over, said Yildirim, referring to the overordering of tonnage. The three major alliances “control 80 percent of the market,” and container lines, “are doing pretty much of what the airlines did [by creating alliances] where they slot share. They compete but they also cooperate.”

Yildirim scoffs at the idea that container lines are unfairly raising rates as President Joe Biden has accused and points to the industry’s deep losses before consolidation and the historic profits spurred on by pandemic-driven demand. In 2011, when Yildirim pumped $600 million into CMA CGM and took a 20 percent share, the industry ended the year with a $7.7 billion loss, according to maritime analyst Drewry. In 2014, Yildirim invested $100 million more, expanding his stake to 24 percent. Seven years later, in 2021, the industry raked in an estimated $190 billion in profits, and Drewry expects profits to hit $300 billion this year.

“This is supply and demand. No one is forcing anyone to ship the goods at these rates,” Yildirim said…

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