The shipping giant announced the suspension of all spot freight increases worldwide, carry out immediately!
It is reported that CMA CGM, the world’s third largest shipping company, announced the suspension of all spot freight increases worldwide, carrying out immediately, until February 1 next year.
According to CMA CGM’s official website announcement, it stated: “Since the beginning of 2021, due to port congestion and a serious imbalance between demand and the effective capacity of sea container transportation, The container shipping spot freight rate continued to rise.”
"Although these market-driven freight rate increases are expected to continue in the coming months, the group has decided to suspend any spot freight rate increases for all its services (CMA CGM, CNC, Containerships, Mercosul, ANL, APL)."
CMA CGM said: “In the face of unprecedented situations in the shipping industry, it will prioritize long-term relationships with customers.”
As CMA CGM announced this news, freight rates were still rising, and regulatory authorities' attention to container shipping was also escalating.
The Drewry World Container Index hit a new high on Thursday, reaching US$10,834/FEU. The Shanghai-Los Angeles freight rate rose to 11,569 USD/FEU, and the Shanghai-New York freight rate rose to 15,124 USD/FEU.
The Baltic Sea Freight Daily Index shows that Asia-West Coast freight is US$20,586 per day, and Asia-East Coast freight is US$22,173 per day. The index includes surcharges during the assessment.
In terms of regulation, the United States, Europe and China held a maritime regulatory summit on Tuesday to discuss supply chain bottlenecks and regulatory issues in the container industry. Last month, the "Ocean Shipping Reform Act" was submitted to the House of Representatives in response to the carrier's practices. In July, the Federal Maritime Commission and the Anti-competitive Department of the Ministry of Justice signed the first ever cooperation agreement.
When asked how he reacted to CMA CGM’s decision, consultant Jon Monroe replied: “Does the carrier finally realize that this chaos must end as soon as possible? Will other shipping companies follow suit?”
CMA CGM is a member of the Ocean Alliance, together with COSCO and Evergreen. According to Alphaliner's data, the Ocean Alliance is the largest participant in Asia-North America trade, with a market share of 37.8%. The alliance members share ships, but they price and sell capacity separately.
For cargo owners, it is better to set the upper limit of freight rate at a record high than not set the upper limit, but even so, the transportation cost will remain at an unprecedented high level, and all costs include not only the basis of the upper limit. Freight, also includes unprecedented additional costs.
In addition, for many importers of high-profit commodities in the United States, the greater challenge is how to obtain their imported goods within an acceptable time frame, which is even more important than adjusting freight rates.
Jefferies analyst Randy Givens said: "The spot freight rate limit is only from September this year to February next year. I think CMA CGM's available capacity may have been almost full from September to February. They did not say how much this applies to. Transport capacity, and did not say how much impact this will have. This may be like a gas station after Hurricane Ida, he told people that gasoline will not increase in price, but in fact there may only be 8 gallons of gasoline left in the tank."
Will other shipping companies follow the example of CMA CGM and set an upper limit on spot freight, which raises another question: Is the shipping company responsible for its shareholders to maximize revenue?
When asked about this responsibility, analyst Randy Givens said: “For all companies, there is always a balance between customers and shareholders. He will not squeeze the best customers and lose future sales, not that It’s a short-sighted approach to earn as much as you can now. There is a balance between squeezing every penny as possible and maintaining relationships with the best customers."
"We may see statements from other shipping companies, which will bring some goodwill to customers and government regulators. But even if they say that they have suspended freight increases, how much have they increased? How much capacity do they have available to sell?" Randy Givens added.
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