Disruption Report #32: A Freeze on Some Freight Rates, Exorbitant Profits for Ocean Freighters, and Mexico and America Meet About Trade

A Freeze on Spot Market Ocean Freight Rates

CMA CGM SA, the world’s third-largest ocean carrier, has announced that it is freezing its spot market freight rates for the next five months. The Financial Times, in its article, “French shipping line CMA CGM caps freight rates amid market turmoil,” thinks it will put pressure on other ocean carriers to do the same. Author Harry Dempsey puts it this way:

The move will reverberate across the industry, putting pressure on rivals such as Denmark’s Maersk and Italian-Swiss Mediterranean Shipping Company to follow suit. Germany’s Hapag-Lloyd said it had already capped its spot rates for some weeks but had not announced the decision publicly.

Let’s hope this is the beginning of a trend.

Mexico Looks to Improve its Supply Chain with the U.S.

Mexican and American officials will be meeting in Washington DC next week to discuss economic issues. If you will recall, things got a little crazy during the last administration, with then-President Trump calling for Mexico to pay for a wall between that country and the U.S.

According to Bloomberg writer Max De Haldevang in his article, “Mexico and U.S. Seek to Mend Damaged Ties in Washington Summit:” “Mexico is seeking to strengthen supply chains and speed up economic help to the south of the country and Central America”

It’s good that the meetings are taking place. The timing is good news for those who want a better land-based manufacturing and shipping infrastructure on the North American continent.

Are Ocean Freight Carriers Making Extraordinary Profits?

The Load Star, a website which describes itself as “Making Sense of the Supply Chain,” ponders the profit ocean freight carriers are enjoying due to historically high ocean freight rates.

According to the article, GSF (GSF stands for Global Shippers Forum) and MDS Transmodal have cooperated in preparing a report that charges the ocean freight carriers with suppressing cargo and keeping freight rates high.

The report points the finger at consolidation with the ocean freight carrier industry. The article quotes Mike Garratt, chairman of MDS Transmodal as stating:

“This high level of consolidation has the benefit of enabling lines to adjust capacity allocation in line with changing demand, but, combined with the resulting very high levels of utilisation, have allowed freight rates to remain at historically unprecedented levels and imply that some potential freight may be being suppressed.

GSF director James Hookham adds:

“What none of the industry metrics show are the huge numbers of shipments not being moved – boxes left on the quay, stacked in the terminal or stockpiled in export warehouses awaiting a slot.”

Amid carriers’ soaring profits, operating costs per container have “barely changed” over the past 18 months, with carriers “earning more than twice per container than at the start of the pandemic.”

According to the article, carriers deny they are making oversized profits. One lobbying group states their costs have gone up. They state:

“Chartering costs have surged by up to 773% since late May 2020, and marine fuel costs have near tripled from US$155.50 a tonne in April 2020, to $435.50 a tonne.

Somehow I think the Ocean Freight Carriers are going to be just fine.

One thought

  1. American toy companies are going to have to bring more manufacturing back to the states, and the US government needs to encourage more moulding factories to return as well.

    We also need to automate our docks and encourage competition in the shipping industry.

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