Liner giant CMA CGM has said it will stop all spot container rate increases with immediate effect until February next year.
The French liner giant said it was “prioritising its long-term relationship with customers in the face of an unprecedented situation in the shipping industry”.
“Since the beginning of 2021, container shipping spot freight rates have continued to rise due to port congestion and the major imbalance between demand and maritime container transport effective capacity,” CMA CGM said.
“Although these market-driven rate increases are expected to continue in the coming months, the group has decided to put any further increases in spot freight rates on hold for all services operated under its brands.”
The measure, announced on 9 September, covers CMA CGM, CNC, Containerships, Mercosul, ANL and APL, the shipowner said.
'Surprise move'
Fearnley Securities called the decision "a surprise move".
"There are a few questions that come to mind," analysts Peder Nicolai Jarlsby, Erik Gabriel Hovi and Ulrik Mannhart said.
The first is whether other lines will follow and if this would then take the sting out of the positive market momentum, they added.
The other factor is what CMA CGM is gaining from this, the investment bank said.
"The rise in container rates have come under increased scrutiny from governments with [the] US, Europe and China meeting earlier this week to discuss bottlenecks and the Ocean Shipping reform act which was introduced in August," the analysts said.
And Fearnleys said there was limited information available as to how much volume this will actually impact.
Some liner companies have noted in second-quarter conference calls that they had good visibility for the balance of the year, suggesting much of their capacity for the final three months of 2021 has already been sold out, the analysts said.
Investing heavily
CMA CGM said it was “investing heavily to strengthen its service offering” and that it has increased the capacity of its operated fleet by 11% since the end of 2019.
The liner company said it has done this through a combination of new vessels and ships bought from the secondhand market. Over the past 15 months, it has also increased its container fleet by 780,000 teu.
TradeWinds has previously reported that CMA CGM expects to take delivery of 26 additional vessels by the end of the year.
Nine are vessels of 15,000 teu, of which six are owned and three are chartered vessels. Another 17 ships to be delivered are secondhand vessels, of which CMA CGM is buying 32 this year.
Through these measures, CMA CGM said it aims at “strengthening its valuable customer relationships” and providing support as they “navigate today’s difficult supply chain challenges”.
News of the freeze on spot rates comes just days after CMA CGM reported a massive surge in second-quarter net profit with expectations of more to come.
Net income rose to $3.47bn in the second quarter, way up on the $136m in the corresponding period last year. Group revenues rose 77.2% to $12.41bn, compared with $7bn in the same period last year.
