Dec. 14, 2022 2:37 pm ET
French container line CMA CGM sees ownership of cargo terminals at U.S. ports as the next step in its bid to extend its shipping business into greater inland logistics.
The world’s third largest carrier by capacity is spending billions of dollars buying and upgrading cargo-handling facilities at the two busiest West Coast and East Coast gateways to speed up the flow of boxes and clear a barrier to efficiency and expansion in supply chains.
“Port terminals are an essential piece of the supply-chain efficiency, being at the crossroads of sea and land operations,” said Christine Cabau Woehrel, CMA CGM Group’s executive vice president of operations and assets.
The shipping company, which has its headquarters in Marseille, France, is among a slew of foreign-based ocean carriers and freight forwarders buying up U.S. companies with the proceeds from huge profits earned during the shipping surge of the past two years. CMA CGM earned $17.9 billion in net profits in 2021 and its earnings in the first three quarters of this year reached more than $20.4 billion.
The carrier in January bought out a partner’s 90% stake in Fenix Marine Services, one of the largest terminals at the Port of Los Angeles with an enterprise value of $2.3 billion. This month, the company said it is acquiring two terminals at the Port of New York and New Jersey for an undisclosed sum. The purchases come as CMA CGM spends billions on acquiring logistics operations as well as on launching an airfreight service.
Ms. Cabau Woehrel said owning terminals on both coasts will help CMA CGM expand its trans-Atlantic and trans-Pacific cargo volumes and give the carrier more control over customers’ freight flows.
The carrier may need to spend up to $1 billion upgrading the GCT Bayonne and GCT New York terminals at the Port of New York and New Jersey so they can handle cargo surges, she said.
CMA CGM expects freight fluctuations will become more frequent as digital tools take on more booking and other logistics decisions, putting pressure on physical operations like moving cargo through ports to keep up with the faster information flows. “We will have to deal with very short cycles made with a series of peaks and lows and the infrastructure capacity will need to have the resilience to be able to cope,“ Ms. Cabau Woehrel said.
Ports around the world in recent years have struggled to handle dips and surges in container volume as the Covid-19 pandemic and the war in Ukraine have upended international supply chains.
Many U.S. gateways, including Los Angeles and New York-New Jersey, are hemmed in by cities and have little room to expand. The South Carolina Ports Authority in 2021 opened a terminal at the Port of Charleston that was the first new such facility in the country in more than a decade.
Some terminal operators are trying to improve efficiency by adding automated container-handling equipment, but dockworker unions fiercely oppose the automation.
CMA CGM now owns or has investments in seven U.S. port terminals and 52 terminals worldwide across 28 countries.
Other carriers have similar strategies. APM Terminals, a subsidiary of Danish carrier A.P. Moller-Maersk A/S, operates 67 terminals around the world. China’s Cosco Shipping Ports has expanded its terminal operations around the world in concert with expansion by state-owned Cosco Shipping Lines.
Shipping industry specialists say ownership of the port sites gives carriers the ability to direct how and when the terminal operates, which can improve the carrier’s efficiency, customer service and overall shipping revenues.
“When it owns a terminal, a carrier can work with management to say this is what will work best for us,” said Paul Bingham, director of transportation consulting at S&P Global Market Intelligence.
Ms. Cabau Woehrel said GCT Bayonne and New York, which handle about 2 million containers a year, could roughly double their capacity with better storage and movement of containers in yards as well as improvements to existing automated equipment.
The pandemic highlighted inefficiencies at ports, as terminals in the U.S. struggled to handle a flood of boxes from overseas, helping to trigger big backups of vessels offshore and leaving importers and exporters frustrated.
London-based Drewry Shipping Consultants said in a Dec. 13 report that port congestion led to a rise in container storage fees and a surge in revenues for terminals. The report warned that terminal profits risk being squeezed over the coming year as container volumes fall and dockworkers demand higher wages.
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