01 CMA CGM announces targeted reduction of sea freight rates
It is reported that CMA CGM announced yesterday that it has decided to take measures to reduce container transportation costs for imports to France and French overseas territories.
The move comes in response to calls from the French government. A few days ago, French Finance Minister Le Maire put pressure on the country’s largest energy company (Total Energies) and shipping company (CMA CGM), requiring them to use part of their huge profits to help consumers cope with high inflation.
It also noted the hope that CMA CGM would offer freight discounts to its customers and Total Energies reduce the country’s high prices at gas stations.
According to preliminary official data, France’s inflation rate climbed further in June from the previous month, reaching a record high of 6.5%. Statistics agency Insee said sharp rises in energy and food costs pushed consumer prices up to 6.5% in June from 5.8% in May.
Recently, CMA CGM issued a statement saying that after consultation with the Ministry of Economy, Finance, Industry and Digital Sovereignty, the CMA CGM Group decided to take targeted measures to contribute to reducing consumer prices for French families.
Specific measures include:
▪ Freight charges reduced by €500 (US$520) per 40-foot container for all goods imported by major French retailers
For consumer goods imported through French ports, CMA CGM will offer its retail customers a discount of 500 euros per 40-foot container. The company said the measure meant a nearly 10% reduction in ocean freight rates.
CMA CGM also stated that this measure must be implemented together with these brands in order to maximize the impact and ensure effective reductions in consumer product prices.
▪ Reduce container freight rates for all goods imported into French overseas territories
For all goods imported into French overseas territories, the freight charges for a 40-foot container are reduced by up to 500 euros. CMA CGM said this reduction amounts to a freight reduction of 10% to 20%, depending on the destination.
CMA CGM said in a statement that these measures will be implemented from August 1, 2022 and will be valid for one year. and called on retail chains to pass on the reduced prices to consumers.
02 Spot freight rates fell across the board for the first time
At the same time, the latest World Comprehensive Container Freight Index (WCI) released by the British consulting agency Drewry also showed that freight rates continued to fall by 3% last week to US$7,066.03/FEU.
It is worth noting that the spot freight rate of the index, which is based on eight major routes between Asia, America, Asia and Europe, and Europe and the United States, has fallen across the board for the first time.
The WCI Composite Index fell 3% last week and is down 16% from the same period in 2021. Drewry’s WCI average composite index assessment so far this year is $8,421/FEU, which is still $4,930 higher than the five-year average of $3,490/FEU.
The spot freight rate from Shanghai to Los Angeles fell by 4% or US$300 to US$7,652/FEU. This is a 16% decrease from the same period in 2021.
The Shanghai-New York spot freight rate fell 2% to $10,154/FEU. This is a 13% decrease from the same period in 2021.
The spot freight rate from Shanghai to Rotterdam fell by 4% or US$358 to US$9,240/FEU. This is a 24% decrease from the same period in 2021.
The Shanghai-Genoa spot freight rate fell 2% to $10,884/FEU. This is a decrease of 8% compared with the same period in 2021.
The spot freight rates of Los Angeles-Shanghai, Rotterdam-Shanghai, New York-Rotterdam and Rotterdam-New York all experienced a decrease of 1%-2%.
03 Freight rates will continue to fall in the coming weeks
Some industry investment consultants said that the shipping super cycle has ended, and freight rates will accelerate their decline in the second half of the year.
According to its estimates, global container transportation demand growth will slow down from 7% in 2021 to 4% and 3% in 2022 and 2023, and the third quarter will be the turning point.
From the perspective of the overall supply and demand relationship, the supply bottleneck has been opened and there is no longer a loss in transportation efficiency. In 2021, ship loading capacity will increase by 5%, and port congestion will cause an efficiency loss of 26%, reducing actual supply growth to only 4%.
However, during 2022 and 2023, with the widespread vaccination, the chain effect of the original restrictions on port loading and unloading has been significantly alleviated since the first quarter. Truck and intermodal operations have gradually resumed, container flows have accelerated, and the number of dock workers quarantined has been reduced. Eliminate idle work, increase ship speed, etc.
It is worth noting that once demand declines in the third quarter, transportation efficiency is expected to further improve. It is expected that as the 26% efficiency loss caused by the port congestion gradually recovers, actual supply growth will significantly accelerate to 25% and 13% in the same period.
The third quarter is the traditional peak season for shipping. According to industry insiders, according to the usual practice, European and American retailers and manufacturing industries start to pull goods in July, but this year there is a strong wait-and-see atmosphere, especially since the demand for Shanghai’s unblocking is not as expected, and the soaring freight prices during the peak season of last year may not be repeated. The price trend will probably become clearer in mid-to-late July.
Analysts believe that the current market is full of� Variables, such as the Russia-Ukraine conflict, global strikes, the Federal Reserve’s interest rate hikes, inflation and other factors may suppress demand in Europe and the United States. In addition, the cost of raw materials, transportation and logistics is high, and foreign trade manufacturers tend to be conservative in preparing materials and production, which may affect the motivation to attract goods; at the same time, , the number of ships at Merseyside Port decreased, the supply of shipping capacity increased, and freight rates continued to consolidate at a high level.
</p
