As a large number of new ships are about to be delivered, France’s CMA CGM, the world’s third largest container shipping company, warned on Friday (10th) that the shipping industry must not engage in price wars to avoid falling into long-term dissatisfaction. prosperity.
This makes CMA CGM another ocean shipping company that is bearish on its prospects after AP Moller-Maersk A/S and Hapag-Lloyd AG. Maersk announced last week it would cut at least 10,000 jobs to maintain profitability.
According to the financial report released by CMA CGM on Friday, net profit in the third quarter plummeted 94% to US$388 million, and the profit margin shrank sharply from 46% to 17.5%. The Marseille-based company also announced it would reduce spending but did not disclose the scale of possible job cuts.
Violent fluctuations in the economy have always been a feature of the shipping industry. During the epidemic, unprecedented demand caused container ship rates to soar and profits to reach record highs. However, the economy will turn around from the second half of 2022. Now, due to the successive outbreaks of the Russia-Ukraine war and the Israel-Kazakhstan conflict, as well as a series of interest rate hikes promoted by central banks, consumer purchases and business confidence have begun to be suppressed, thereby impacting demand.
Ramon Fernandez, chief financial officer of CMA CGM, said on Friday: “With weak demand and high supply, there is an immediate risk of imbalance. In this case, rates will fall.”
In the ten years before the outbreak of the epidemic in 2020, container ship operators struggled to make profits as shipping capacity far exceeded demand, and it was common to hear that they used prices below cost to defend market share.
CMA CGM CFO Fernandez did not clearly indicate whether a price war had begun in the shipping industry, but called on peers to exercise restraint and said that current rates remain roughly at 2019 levels.
He told reporters on Friday: “It is impossible to predict what will happen in 2024. Everything depends on the behavior of each operator. We estimate that capacity will grow by 9% and new ships will replace old ships.”
CMA CGM’s fleet currently has 621 ships, and 100 new ships are expected to be added. Fernandez said: “Every company must take responsibility to ensure that the market still operates reasonably when rates are at a relatively low point. If the price war continues for a long time, it will not only hurt the initiator, but all people, including customers. They may also suffer from the unusual behavior of their partners.”
CMA CGM is controlled by French billionaire Rodolphe Saadé and his family. Over the past two years, soaring profits have enriched the pockets of Saddur and his European peers, including Mediterranean Shipping Company (MSC) founder Gianluigi Aponte and logistics giant Kuehne+Nagel shareholder Klaus Kuhn. – Michael Kuehne).
CMA CGM has relied on profits from the shipping industry to expand its reach, such as its recent increase in media assets such as the French newspaper La Tribune. CMA CGM is also promoting the largest merger and acquisition transaction since the company was founded: the acquisition of the logistics business of French businessman Bolloré Group for 5 billion euros ($5.3 billion).
The Sadr family, which controls CMA CGM, is now worth about $19 billion, according to the Bloomberg Billionaires Index, down from $33 billion in April.
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