France’s CMA CGM Caps Its Price: Is It A Blessing Or A Profit-Making Scheme In Disguise?

CMA CGM is one of the world’s largest ocean couriers. With headquarters in France, the company is responsible for a massive chunk of the global freight industry. As imaginable, CMA CGM’s decision to cease all increases in spot rates worldwide has taken everyone by surprise.

This announcement comes at a time when freight prices are high and continue to increase everywhere, leaving some to wonder what exactly is going on here. Is CMA CGM doing this to lift some pressure off the industry, or is there something more sinister in play?

After all, increased freight rates have affected almost every industry that requires shipping globally. Since the beginning of 2021, container shipping spot rates have continued to rise dramatically as countries struggle to cope with port congestion. For most of the year, we have seen a major imbalance in the demand and supply of effective maritime transport.

What Does This Mean?

In their announcement, CMA CGM claims to be prioritizing long-term relationships with customers as well as making it easier for newer, smaller customers in the face of an “unprecedented” situation in the industry.

There is no secret that the current predicament is a result of the lockdown and sanctions placed by governments worldwide in an effort to keep COVID-19 at bay. However, until now, no major shipping company has made an effort to do anything regarding the increasing prices.

CMA CGM’s decision could definitely impact the rest of the shipping industry. As both buyers and sellers across a variety of industries look for ways to save costs, this might be one of the most strategic decisions the shipping giant could have made.

Experts are already questioning the legitimacy of this stance. One of the most popular questions that many have already asked consists of inquiries on how much exactly CMA CGM has already increased to warrant such a cap, as well as speculation on whether the company’s roster has already been booked until 2022.

Many believe that this is nothing more than a publicity stunt that will render the rest of the shipping companies to decrease their prices. After all, valuing customer relations is important, but at what cost?

Freight companies have only increased their prices as a result of market conditions and to force them into a corner by capping spot rates seems to be a very interesting powerplay. After all, no company wants to work at a loss, and shareholders will not be pleased about this.

The Takeaway

As things take an interesting turn, many wonder what the future will look like for the industry. On the regulatory front, the United States, China, and Europe all attended a virtual summit last week to discuss chain bottlenecks and oversight of the container industry. 

Similarly, just last month, the Ocean Shipping Reform Act was introduced in the House of Representatives, specifically targeting carrier practices. Could this be a show of goodwill from CMA CGM which others may follow? We shall have to see what happens next.