Seven months into 2024, CMA CGM believes ocean freight rates may have hit their high point.
After a quarter which saw the container shipping giant generate revenue of $13.1 billion in the second quarter of 2024, up 6.8 percent from the year prior, chief financial officer Ramon Fernandez said freight rates “seem to be reaching a plateau, especially for Asia-to-North Europe and Asia-to-Mediterranean lines which were the most impacted by the situation in the Red Sea…I can’t say what will happen in the next quarters.”
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Fernandez’s observations seem to have some potential merit when accounting for recent container prices, which have not seen the acceleration in July that they saw through May and June.
The Drewry World Container Index (WCI) dipped 2 percent to $5,806 per 40-foot container as of Thursday, marking the first week-over-week decline in the index since April 25. Another major indicator, the Shanghai Export Containerized Freight Index (SCFI), has calculated that declines for cargo out of the Chinese port have linger for three straight weeks after July 5. The SCFI peaked at 3,733.8 on July 4 to 3,447.9 as of Friday.
The ocean carrier is one of many that has been impacted by heightened port congestion worldwide in the wake of the Red Sea crisis.
Most CMA CGM vessels circumvent the Red Sea by taking the longer route around southern Africa’s Cape of Good Hope, but can use the Red Sea under French military escort if the shipper desires. According to Fernandez, customers pay the same rates regardless of route used.
CMA CGM also has been impacted by retail’s move to pull forward imports ahead of the peak shipping season in 2024, with the ocean carrier saying it experienced 10 percent growth in Chinese exports to the U.S.—doubling last year’s rate.
Shippers are also likely to have made the push due to concerns of a possible dockworker strike on the East and Gulf Coast ports, as well as the anticipation of higher American tariffs on Chinese products later this year according to Fernandez.
“There is undoubtedly some front-loading,” Fernandez said during the company’s earnings call.
CMA CGM’s revenue reflected stable year-on-year sales for the shipping business and higher revenue for the logistics business, boosted by the acquisition of Bolloré Logistics in late February. However, the company still saw net income dip more than half from the year prior to $661 million, down from $1.3 billion in the 2023 second quarter.