In an attempt to tackle container shortages in the United States, CMA CGM has launched a financial incentive scheme. Could this really boost its business or is it just a gimmick?
On 16 May, CMA CGM announced the launch of a financial incentive scheme to encourage customers to return their empty containers rapidly. The scheme has been introduced in the United States and is due to last until 15 July. It provides for a credit of USD300 for each full 40' container returned empty by customers within four days.
The mechanism is not an easy one to set up. I tried something similar in France at a time when I had other professional responsibilities. I was looking to respond to short-term shortage of containers at inland depots but I have to recognise that my efforts were unsuccessful. Yet, incentives are a powerful tool and one which is essentially "win-win".
CMA CGM's initiative give a clear boost to US foreign trade. It has been hailed as such by Gene Seroka, executive director of the Port of Los Angeles. "With this incentive program, the CMA CGM Group is facilitating a more robust flow of goods through the Port of Los Angeles and helping U.S. exporters get their product to destinations around the globe more quickly," he said. It would be hard to find a better ambassador at a time when talks with dockers' representative organisations are marking time, adding to concerns about the prospects for the port's ability to function.
For its part, CMA CGM can expect to recover empty containers more rapidly for redistribution on Asian markets.
A useful anti-congestion weapon
Full containers from Asia are the main cause of today's congestion in Western port terminals. The situation has been aggravated by the arrival of waves of mega-ships needing to be unloaded as a result of the disorganisation of shipping services. Introducing incentives for early recovery of containers from the quayside, so that they can be replaced by newly unloaded containers, will contribute to creating the fluidity need to get back to full logistical efficiency.
CMA CGM introduced a first incentive scheme to encourage customers to recover their containers rapidly in late 2021. This second scheme is a response to the need to get empty containers back into circulation as quickly as possible. Both these schemes are serving as useful anti-congestion weapons and are worthy of consideration by others.
A political dimension
The scheme also has a political dimension since, through it, CMA CGM is showing its readiness to better meet the needs of American exporters in the spirit of the Shipping Act. This should head off potential shows of zeal from the Federal Maritime Commission regarding shipping company practices.
The measure taken by CMA CGM is also timely, as US exports are beginning to grow again. In April, they increased 3.1% over the previous month and 21.2% over April 2021. Imports were up 21.7% year on year but were down 5% on March 2022. The lockdowns in China may have played a role in the fall in imports, which was particularly marked for consumer goods (-7,9%). The aim now is to keep the improvement in exports going in May and June, alongside a recovery in imports.
Reducing waiting time for full containers and speeding up the reuse of empty containers is a step in the right direction but we should not lose sight of the fact that the real solution is to restore the regularity of container shipping services.
In this last respect, much still needs to be done but no body can force the shipping companies to act. They know that a sharp return to service regularity will automatically lead to a 20% increase in monthly capacity in terms of space and the number of containers available. They have by no means forgotten the overcapacity which damaged their financial results from 2009 to 2019. Their caution, therefore, is very understandable.