New York - Rodolphe Saadé, the Billionaire Chief Executive of French container line CMA CGM, says the shipping industry shouldn’t panic over a sharp retreat in earnings.

The Head of the World’s third-largest liner company was quoted in an Wall Street Journal that he expects the weak growth in global trade to continue through 2024. But Saadé said the tumbling profits from record highs during the Covid-19 pandemic essentially bring the business back to prepandemic levels. 

“Most probably 2024 will be pretty much the same as the second half of ’23, provided [there is] no exceptional crisis,” Saadé said. 

“We expect more tension in the months to come,” he said. “We see that the demand is not as strong as before, we see crisis around the world, and this is having an impact on the shipping business.”

Some of the world’s largest ocean carriers made tens of billions of dollars during the pandemic, when shipping demand soared and freight rates skyrocketed. Some carriers like CMA CGM plowed those profits into seaport terminals and air cargo, trucking and warehousing operations. They also leaned on their big cash stockpiles to order a record number of new containerships that now are headed to sea after the red-hot Covid-era demand has evaporated.

Combined net profits for container shipping lines in the second quarter fell to $8.9 billion, down $54 billion from the industrywide earnings the same quarter last year, according to industry analyst John McCown. Denmark-based marine data company Sea-Intelligence said freight rates are down between 48% to 67% from a year ago. 

CMA CGM’s second-quarter profits of $1.3 billion were down 83% compared with last year. 

CMA CGM has been among those feeling the impact. Its second-quarter profits of $1.3 billion were down 83% compared with 2022. 

Saadé said he expects the second half of 2023 will be weaker than the first half of the year and that the company faces headwinds through 2024 as ocean carriers deploy a record number of new containerships at a time of geopolitical instability and flagging freight demand. 

CMA’s struggles are in line with its competitors. Denmark-based A.P. Moller-Maersk in August posted a second-quarter profit of $2.9 billion, down from $10.3 billion in the same period last year. 

Orient Overseas Container Line, a Hong Kong-based unit of China’s Cosco Shipping Holdings, reported operating profit for the first half of this year of $1.1 billion, down 81% from the same period in 2022. The carrier’s chairman, Wan Min, said in an August company report that the decline “has certainly been spectacular in terms of both absolute dollar value and in terms of percentage, but this is simply a reflection of just how high the freight market had risen.” 

Investors have punished the carriers over the declining earnings. Shares in Maersk have fallen 45% and those of German container line Hapag-Lloyd  have fallen more than 60% from their 2022 highs.

Saadé said carriers should accept that the industry is returning to normal cycles that include long periods when profits are tight. He said that despite war in Ukraine, instability in the Middle East and an economic slowdown among some of the world’s largest economies, he expects the global economy to grow between 1% and 3% in 2024.

“We see a soft market,” he said, but “there is still demand.” 

The U.S. remains a big importer, he said. “Maybe less than during the Covid years, that is for sure, but there will still be growth. Moderate growth, but there will still be growth. This is the way we see 2024.”

The challenge for carriers is the record number of containerships that are being delivered over the next couple of years. CMA CGM has 116 new vessels on order, according to data provider Alphaliner, second only to the world’s largest carrier, Switzerland-based Mediterranean Shipping.  

“The issue we have in our industry is supply and demand,” Saadé said. Saadé said the new ships are needed to replace older vessels, to handle future trade growth and to meet CMA’s goal of becoming carbon neutral by 2050. The carrier has already deployed ships powered by liquefied natural gas and is anticipating future ships powered by cleaner fuels, such as methanol and biomethanol.