TPM21: CMA CGM’s Saadé blames disruption for elevated rates, low service

TPM21: CMA CGM’s Saadé blames disruption for elevated rates, low service

CMA CGM Group chairman and CEO Rodolphe Saadé kicks off the TPM21 conference from his Marseille headquarters. Photo credit: CMA CGM.

Rodolphe Saadé, chairman and CEO of CMA CGM Group, told the virtual TPM21 conference Thursday that while he sympathized with shippers facing record-high rates and poor service, the current extreme price levels were a result of the disrupted markets.

But given the historically low rates in the years prior to the COVID-19 pandemic, Saadé said the container shipping industry needed overall rate levels to increase, and this would be a central part of new contract negotiations.

“Some customers may say they do not want to renegotiate every year and want a multi-year contract, others will say they want to take advantage of the market and do a spot negotiation,” he said. “We will adapt to the needs of our customers, but again, we cannot work for free.”

The trans-Pacific container shipping system in particular has sagged under a seemingly unending deluge of imports from Asia into North America. The most severe congestion is concentrated around the US gateway ports of Los Angeles and Long Beach, which are expected to see terminal congestion and vessel backlogs for at least the next two to three months.

Months of strong demand has led to the slow turnaround of containers within the overwhelmed US inland logistics system. The slow return of containers to Asia has led to equipment shortages in China, leaving shippers struggling to get their cargo loaded and transported.

“I am telling our customers I understand their frustration, but we are going through exceptional times,” Saadé told attendees. “Volume from Asia, and from China especially, to various destinations is extremely high. We are doing our best to find equipment and going on the charter market to find vessels, but it is not easy. We are doing our best but would like them to be patient.”

But Saadé conceded that the service levels being provided by carriers had to improve. Data from Sea-Intelligence Maritime Analysis shows on-time performance in January from Asia to the West Coast of North America fell to 13.8 percent, down from 68.1 percent in January 2019.

“We cannot say to our customers, ‘You have to pay the price, but I am not going to give you containers, and I’m going to blank sailings every week,’” he said. “Blank sailings are not solutions. We were forced to do so during COVID, but they should not be used. As a shipping line it is more important to offer a good service.”

Ships, terminals are costly assets

However, Saadé said the CMA CGM was investing heavily in technology and assets such as terminals and vessels, and that came at a price. He hammered home the point that, despite the current spike in rate levels, prices have been too low for years.

“Today the period is exceptional with extremely high rates because of the COVID-19 situation, but there needs to be an understanding that we cannot lose money always, and that has been the case for many years,” he said. “Shipping logistics is very important to the industry, and that is why a decent price has to be agreed, otherwise we will be in trouble.”

Over the past decade, slow growth and a series of rate wars eroded carrier revenue and led to a series of heavy losses, sparking widespread industry consolidation and the bankruptcy of Hanjin Shipping in 2016.

But container shipping will certainly not be in any financial trouble this year, according to Peter Sand, chief shipping analyst at ship owner association BIMCO. In a market outlook released Thursday, Sand said rates will remain elevated, especially on the contracted side of the business where the bulk of the cargo is carried.

“The long-term contracts currently being negotiated and fixed will provide a solid income stream for carriers throughout the year,” he said. “As these account for by far the largest share of transported volumes and carrier income, the current strength of the contract market paints a promising picture for carriers’ bottom lines this year, even if rates on the spot market start falling.”

Contact Greg Knowler at and follow him on Twitter: @greg_knowler.