CMA CGM head doesn’t see shipping headwinds subsiding anytime soon, but no need to panic: CMA CGM CEO Rodolphe Saadé has said that the rapid decline in profits seen recently by carriers represents a readjustment to pre-pandemic levels, reported the Wall Street Journal. The head of the world’s third largest carrier expects little change over the coming year as the sector contends with sluggish demand, falling rates, and overcapacity. “We expect more tension in the months to come,” Saadé is quoted as saying, adding that 2024 will probably look a lot like 2H 2023, barring an “exceptional crisis.”

By the numbers: Combined carrier bottomlines were USD 8.9 bn in 2Q 2023, down USD 54 bn from the same period last year, according to industry analyst numbers cited by the report. Freight rates have also seen a sharp fall, dropping between 48% to 67% in comparison to the same period last year, according to Sea-Intelligence data cited by the report.

What do global crises do to carriers anyway?They send rates soaring. Despite a downward trend in shipping rates post-pandemic, global shippers are benefiting from a temporary spike as short-term shocks disrupt supply chains, Bloomberg reported. Droughts, backlogs at the Panama Canal, and the Hamas-Israel war have seen the Baltic Dry Index — a widely followed benchmark for dry goods shipment rates — nearly double since September, while the the Baltic Dirty Tanker Index — an equivalent benchmark for crude oil — is up 50% so far this month, according to figures cited by Bloomberg.

But there is no guarantee that this will last: A worsening global economic outlook means that freighters should not pin their hopes on a rebound in trade and a long-term increase in shipping rates, columnist Tim Culpan writes for Bloomberg. Nonetheless, historical evidence has shown that short-term shocks, such as the pandemic and Russia’s invasion of Ukraine, and vessel capacity are much more important determinants of shipping rates, the report added.

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