CMA CGM ups cost-cutting intensity, streamlines routes

Dive Brief:

CMA CGM is in the midst of a large-scale cost-reduction effort which involves reducing the number of lines it operates.
The "Agility" cost-reduction plan, first implemented in 2016, is intensifying in 2019, according to a press release. Through line rationalizations, "greater operational efficiency, lower logistics costs, new partnerships with its suppliers, and the implementation of innovative technical solutions on board its ships to reduce their energy consumption and carbon footprint," CMA CGM has so far saved $245 million. New line rationalizations will go into effect October 1.
The container line lost $43 million in the first quarter despite a 36.9% bump in revenue and a 4% uptick in volume. The losses are largely due to CMA CGM's acquisition of CEVA Logistics, which it completed last month. CMA CGM CFO Michel Sirat confirmed to Reuters he plans to bring CEVA to break-even status by the end of the year.

Dive Insight:

The carrier plans to use the tactics of simplified service, technological improvements and reduced energy consumption to save a further $1.5 billion in operating costs — though it did not offer a timeline for these savings.

Shifting tides on the geopolitical front will not affect overall volumes for the balance of the year, Sirat told Reuters after the carrier announced its first-quarter results Wednesday. Sirat said he still expects volumes to grow in 2019.

Sirat's comments indicate the latest round of tariff turmoil that began earlier this month may not cause the dramatic swings in ocean shipping volumes we saw last year. The origin of the carrier's volume may shift from China to other countries, but the amount is likely to stay within expectations, he said.

The carrier may see its cost reduction work as further insulation from unpredictable global trade. Initially, the service changes could be an inconvenience to shippers, but in the long term, rationalizations may serve as a hedge against rate fluctuation. Conspicuously unmentioned by Sirat was the further pressure the IMO 2020 regulations are placing on the carrier's rates, fees and operating costs.