The world’s third biggest shipping company has said that it is freezing its spot rates for six months as the cost of shipping goods continues to soar.
French shipping giant CMA CGM announced it was capping freight prices until February 2022, saying it is “prioritising its long-term relationship with customers”.
The FT reports that the move could force CMA CGM’s competitors to look at their own pricing policies.
Boom time for shipping
It comes at a time when it costs more than $20,000 to ship a standard 40-foot container from China to the east coast of the US, compared with less than $3,000 two years ago.
According to the Business Times, shipping companies are making more money than they have since 2008.
It says container shipping costs are up by 500% in a year, pushing up prices on everything from toys and bikes to coffee.
Splash reports that other shipping companies have been caught flat-footed by CMA CGM’s move.
HMM, Mediterranean Shipping Co (MSC), and Ocean Network Express (ONE) all declined to comment on their own spot pricing arrangements.
A spokesperson for Maersk told Splash it was determined to move towards a larger share of longer term contracts, which has increased to around 60% of its total bookings.
Hapag-Lloyd has claimed that it has also frozen rates in recent weeks but had not announced this yet.
According to Lloyd’s Loading List, container lines have been under pressure from shipping industry representatives and government regulators to limit container shipping spot rate rises.
Regulators from the US and China have launched various attempts to pressure lines into capping prices and threatened to investigate any potential unfair practices that may be pushing up ocean freight rates.
Freight rate benchmarking platform Xeneta has reported that long-term contracted ocean freight rates are more than 85% higher than last year.
Xeneta said that August saw rates rise by 2.2% (compared to July’s 28.1%) and “there appears to be little sign of relief on the horizon, with increasing port congestion and relentless demand ahead of the all-important pre-Christmas period”.
“Container ship operators are reaping record-breaking financial rewards as a result,” it added.
Many in the industry believe shipping lines need to do much more to curb the exponential price rises and restore stability in the industry.
James Hookham, a director at the Global Shippers’ Forum, told the Loadstar: “It’s like the torturer asking the prisoner ‘aren’t you grateful I’m not turning the screw on the rack any further?’”
He also claimed many smaller shippers could become bankrupt before Christmas due to the crisis.
Jordi Espin, policy manager for maritime transport at the European Shippers’ Council, said the move was a ploy to force shippers into lengthy contracts at high-rate levels.
“When we discuss contracts with the carriers, they want to talk about ammonia and higher costs,” he said. “Where are they when you want to discuss the impact on the market from the Suez blockage or the Covid outbreak at Ningbo? They hide behind their website.”