CMA CGM Sees Abrupt Return to Normal for Freight Rates

French shipping giant CMA CGM has reported yet another huge quarterly profit, but uncertain economic conditions, normalizing trade flows and a sharp decline in freight rates weigh on the company’s outlook for the sector.

The results provide further evidence that the container shipping market has made an abrupt 180 after its two-year pandemic-fueled bull run.

“The third quarter of 2022 was shaped by persistent geopolitical tensions, which spurred higher inflation and dragged down consumer spending, which is increasingly shifting to services in the wake of COVID-19. These factors dampened freight demand, but also helped to ease a certain amount of port congestions,” the world’s third largest container shipping company said on Friday.

“The Group was also impacted by the unstable geopolitical situation, specifically by the increase in unit bunker costs driven by higher energy prices. On a like-for-like fuel consumption basis, these higher energy prices led to a year-over-year increase of USD 822 million in bunker costs in the third quarter of 2022. The slowdown in shipping demand pushed down spot freight rates, particularly on main East-West routes,” the company said.

CMA CGM reported a net profit of $7 billion in the third quarter, up from $5.6 billion a year ago. Group revenue stood at $19.9 billion, mostly driven by its maritime shipping business. Transported volumes in Q3 rose 4.1% to 5.7 million TEUs.

CMA CGM said its strong operating performance helped it to reduce its net debt by $5.3 billion during the third quarter, to just $78 million as of September 30, 2022.

Looking ahead, inflation, slowing consumer spending and economic uncertainty will result in “a faster return to more normal freight rates” in the fourth quarter and lower margins, the company said.

“The CMA CGM Group once again recorded strong results in the third quarter,” commented Rodolphe Saadé, Chairman and Chief Executive Officer. “Over the past two years, we have significantly strengthened our financial structure and developed our business through the entire supply chain. Declining demand has prompted a return to more normal international trade flows and a significant reduction in freight rates. In this new environment, we will continue to invest to strengthen our positioning in maritime shipping and logistics, accelerate our energy transition and provide our clients with even more efficient solutions.”

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