Door open for CMA CGM in Djibouti?

Specifically, CMA CGM is said to be looking to secure operator status at the extension of Doraleh Container Terminal (DCT), the facility from which DP World was unceremoniously expelled last year by the Djibouti Government despite a London tribunal ruling that allegations of mis-management and corruption made by the Government of Djibouti were not proven. Djibouti’s answer to this ruling was to nationalise DCT and expel DPW paying zero attention to the tribunal ruling and DPW’s protestations about the country breaking international law.

Subsequently DP World filed a lawsuit against state-owned China Merchants Port Holding. That aims to secure damages and declare that China Merchants unlawfully procured or induced Djibouti’s breaches of its agreement with DP World.

China Merchants entered the Djibouti market in 2013. China Merchants Port Holding acquired 23.5% shares of the Djibouti port authority Port De Djibouti SA (PDSA) for $185m and has invested in redeveloping the port area. It has also been involved in the development of multipurpose port facilities in Djibouti, incorporating substantial container handing capacity, and in mid-2018 highlighted its intention to expand its involvement in Djibouti with the redevelopment of the old port area of Djibouti. It was not long after this that DPW initiated its legal action against China Merchants.

DP World reaction

This ‘recent’ history raises the interesting thought as to what DPW’s reaction will be to the suggestion that CMA CGM is interested in an involvement in the extension to DCT? Such an involvement could be through its port investment vehicle Terminal Link in which China Merchants holds a 49% equity stake, acquired in June 2013. CMA CGM also has another port investment arm, a wholly-owned one. But whatever vehicle may be used the prospect of DPW taking on CMA CGM has more implications to it than its legal dispute with China Merchants Port Holdings. CMA CGM, the shipping line, is a major user of DPW container terminals around the world and, given this, there is a strong logic associated with not going to war with one of your major customers. A step on from this reality there is also what can be termed the ‘China Inc’ factor.

CMA CGM operates in the Ocean Alliance, one of the new mega-alliances formed recently in the container sector. Other participants include the Chinese shipping lines COSCO and OOCL as well as the Taiwan-based line Evergreen. The Ocean Alliance has just announced what it has dubbed as its ‘Day 3 Product’ – its new service network entailing the use of around 330 vessels, 111 of which will be operated by CMA CGM, offering a total carrying capacity of around 3.8m teu over 38 services. Given the known close linkage between the Chinese state-owned shipping lines and China Merchants, coupled with CMA CGM’s close links with these Chinese interests it seems that the wise course of action for DPW is to avoid any conflict with CMA CGM.

In a wider context remember that Dubai still has substantial investments in Djibouti outside the container business – in the oil port sector and others. So while it might rankle with DPW, the door, in practical terms, may well be open for CMA CGM to pursue its interest in the DCT extension plus reportedly the management of the Addis Ababa-Djibouti corridor, recently the focus of new rail system construction by China. Or is there a ‘Chinese wall’ involved and down the track will we see further Chinese involvement?