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CMA CGM Closes USD 815 Mn Sale of Eight Port Terminals to Terminal Link
French container shipping and logistics company CMA CGM has completed a first transaction related to the sale of eight port terminals to Terminal Link, a joint venture between CMA CGM and port developer and operator China Merchants Port Holdings (CMP).
As informed, this first transaction represents a total all-cash consideration of USD 815 million. It is part of a wider agreement covering a total of ten terminals reached between CMA CGM and CMP in December 2019.
The sale comes only a few days after the duo received an EU approval for the transfer of stakes of the ten port terminals to Terminal Link joint venture, which is 51 percent owned by CMA CGM and 49 percent by CMP.
The initial disposal includes Odessa Terminal in Ukraine, CMA CGM PSA Lion Terminal (CPLT) in Singapore, Kingston Freeport Terminal in Jamaica, Rotterdam World Gateway in the Netherlands, Qingdao Qianwan United Advance Container Terminal in China, Vietnam International Container Terminal in the country’s Ho Chi Minh City, Laem Chabang International Terminal in Thailand and Umm Qasr Terminal in Iraq.
According to CMA CGM, the sale of the remaining two terminals, totaling more than USD 150 million, is expected to be completed by the end of the first half of 2020 once the approval by relevant regulatory agencies is received.
CMA CGM reduces debt and boosts liquidity
With this transaction, CMA CGM is proceeding with the delivery of its USD 2.1 billion liquidity plan announced in November 2019.
The plan, among others, reduces CMA CGM consolidated debt by more than USD 1.3 billion by the end of the first half of 2020 and allows to extend certain financing facilities maturing during the year.
What is more, the French group strengthens its balance sheet amidst the high uncertainty created by the global COVID-19 health crisis. While the pandemic has had a limited impact in the first quarter of 2020, the group expects a decline in volumes, particularly outbound to Europe and the United States.
“This transaction, announced on December 20, 2019, is an important step in its 2.1 billion USD liquidity plan and will allow us to strengthen our balance sheet,” Rodolphe Saadé, Chairman and Chief Executive Officer of the CMA CGM Group, commented.
“Amid the high uncertainty created by the COVID-19 health crisis, the closing of this transaction as previously announced demonstrates the resilience of the CMA CGM Group.”
CMA CGM operates a fleet of 502 vessels which serve more than 420 ports around the world. The company’s containerships carried nearly 22 million TEUs in 2019.
Container lines cut Asia vessel capacity 23%
Container lines reduced vessel capacity in the Asia trades by some 23% between mid-January and mid-March this year as smaller vessels were deployed according Ocean Insights (OI).
Looking at the impact of the COVID-19 pandemic on the container shipping market OI said that lines had responded by replacing larger volume vessels with smaller ones, in particular on the Asia trades.
“This is reflected in measured Vessel Capacity (in teu) across major carriers which is especially strong in the Asian trade lanes with a 23% detected decrease from mid-January to mid-March,” OI said.
“In comparison, the global decline is less acute with a 7% decrease from a peak of 16.8m teu capacity in mid-January to a low of 15.5m teu measured capacity.”
Blank sailings have been a major means of managing capacity in container shipping has been blank sailings. “The OI system has detected an ‘unusually high’ number of blank sailings,” the analyst commented.
Its system counted 386 blank sailing announcements that will take place between mid-March until the end of April 2020.
Vietnam enjoys trade surplus of US$2.8 billion in first quarter
Vietnam ran a trade surplus of 2 8 billion USD in the first quarter of this year higher than 1 5 billion USD recorded in the same period last year despite the growing COVID 19 pandemic in the country major export markets
The domestic sector posted a trade deficit of US$4.4 billion while the foreign direct investment sector, including crude oil, recorded a trade surplus of US$7.2 billion.
Accordingly, the export revenue of goods in the first quarter was estimated at US$59.08 billion, up 0.5% year-on-year. Eight groups of commodities saw export turnover surpassing the US$1 billion benchmark, accounting for 70.6% of the total.
The US remained Vietnam’s largest importer with a total value of US$15.5 billion, up 16.2% annually. It was followed by China with US$8.4 billion, up 11.5%; the European Union US$7.5 billion, down 14.9%; ASEAN US$6 billion, down 5.2%; Japan US$4.8 billion, up 3.5%; and the Republic of Korea (RoK) US$4.5 billion, down 2.7%.
Meanwhile, the country’s goods imports decreased by 1.9% to US$56.26 billion. Up to 14 kinds of goods spent more than US$1 billion each, or 72.9% of the total.
Production materials were bought for an estimated US$52.6 billion, down 1.2% annually and equivalent to 93.5% of the combined. Expenditure on consumer goods stood at US$3.66 billion, down 10.6%, accounting for 6.5% of the total.
China remained the largest exporter of commodities to Vietnam with a turnover of US$13.3 billion, down 18% year-on-year. It was followed by the RoK with US$11.7 billion, up 2.4%; ASEAN US$7.2 billion, down 8.3%; Japan US$4.9 billion, up 15.8%; the EU US$3.4 billion, up 5.2% and the US US$3.4 billion, up 13%.
The GSO predicted that once the EU – Vietnam Free Trade Agreement (EVFTA) takes effect, Vietnam’s exports to the EU will soar by over 20 percent this year and the growth will be on the rise in the following years. Aquatic products are expected to benefit most from the deal.
The EU is now the second largest importer of Vietnamese aquatic products, behind the US.
Vietnam’s shipment of farm produce to the EU is also forecast to hike by around 10% this year.
Mass items of billions of USD face difficulties when EU closes the border
VCN – According to the Ministry of Industry and Trade, as the EU has closed borders, consumption demand of Vietnam's main export products like textiles, footwear, furniture and phones will likely decline.
Textile, leather, shoes and wood face difficulties
Facing the outbreak of acute respiratory infections caused by a new strain of coronavirus (Covid-19) becoming more and more serious, the EU has become the world's epidemic.
On March 17, for the first time, leaders of all EU member countries agreed with the proposal of the European Commission to adopt a joint plan of closing the border of EU territory. This closure of external borders is not a lockdown.
According to the Ministry of Industry and Trade, considering a number of economic aspects, the epidemic control measures will affect the speed of goods movement from export, transportation, customs clearance, storage and loading to consumption; causing disruption or delaying the flow of economic - trade - service.
Besides that, supply-demand of the market; demand for goods exchange; and trade activities between the EU and partners, including Vietnam, will also be limited.
Demand for consuming non-essential goods such as textiles, footwear, furniture, and phones, (Vietnam's main export products in the EU market) will likely decline. However, forecasts for purchasing power for agricultural and food products can still be maintained.
The Ministry of Industry and Trade further informed that amid the Covid-19 epidemic, goods imported into EU countries by air could be significantly affected due to flight cancellations, delays or reductions. Besides that, intra-regional transportation is also affected as some countries are tightening border control regulations.
The Ministry of Industry and Trade analyzed that the regulations related to epidemic control may also delay the signing of export orders in the future between Vietnam and EU partners; obstructing bilateral trade - investment promotion activities; and preventing the movement of experts and workers in restricted areas in the context of tightening isolation to combat epidemics.
Will exports drop by 6-8%?
The EU is an important trading partner and the second-largest export market of Vietnam. The volume of Vietnam's exports and imports to the EU is relatively large.
In 2019, the volume of goods exported by sea reached 20.5 billion EUR, by air hi 14.5 billion EUR, railways 671 million EUR; while imports via sea, air and rail were respectively 5,990 billion EUR, 3.56 billion EUR and 9 million EUR.
The first three months of the year saw a reduction in imports and export between Vietnam and the EU due to lots of holidays for both sides. Besides that, enterprises in some areas will wait for the Vietnam-EU FTA (EVFTA) to take effect to enjoy preferential tariffs along with the current forecast of economic growth of the EU. It is forecasted the prospect of import and export growth between Vietnam and the EU is relatively low.
"The exports of Vietnam in the first and second quarter exports were forecasted to reduce by 6-8% if the epidemic continues occurring until June. Some key commodities such as computers, phones, and components were forecasted to continue to decline sharply due to difficulties in both supply stages and reduction in market demand," the Ministry of Industry and Trade forecasted.
In the second half of 2020, according to the Ministry of Industry and Trade, export growth may be better because the epidemic is repelled and the EVFTA comes into effect.
Therefore, enterprises need to closely monitor the epidemic to have an appropriate production and business plan and have a plan to transform trade promotion in the direction of taking advantage of online advertising, connecting online businesses to maintain and develop the market even when the disease is happening, as well as ensuring that it can be quickly recovered business activity right after the epidemic is diminished and ends.
According to the border closure plan of EU territory, non-EU citizens will not be allowed to enter the region for at least the next 30 days and it could be extended if necessary. EU citizens, their relatives, diplomats, staff/medical professionals, and freight carriers are exempt from the above provision. Internal movements are permitted but subject to certain restrictions.
The purpose of this regulation is to protect the health of EU citizens, ensure the appropriate treatment of individuals wishing to transport and ensure basic goods and services are accessible.
This EU regulation may not affect the import and export of goods between Vietnam and the EU in the short term because it only applies to individual travel routes; so basic cargo transportation and trading activities are not restricted.
(Source: VN Customs News, World Maritime News, American Shipper, Seatrade Maritime)
