Shipping group CMA CGM benefited in the first quarter from a rebound in demand for consumer goods and higher freight rates linked to Red Sea disruption, but expects an influx of new ships to weigh on the market later in the year, it said on Friday.

France-based CMA CGM, the world’s third-largest container line, reported first-quarter net profit of $785 million, recovering from a $90 million loss in the final quarter of 2023.

That was down from a net profit of $2.01 billion in the first quarter of 2023, when CMA CGM was emerging from a post-pandemic shipping boom that generated record earnings and a flurry of acquisitions in port terminals, logistics and the media.

The core profit margin at thegroup’s main shipping business jumped to 24.8% in the first quarter from 9.5% in the previous quarter. This was supported by buoyant demand, notably due to restocking by firms in the United States, and rising shipping prices as vessel rerouting away from the Red Sea absorbed excess fleet capacity.

Brisk demand is expected to continue but most of an expected 9-10% expansion in global fleet capacity in 2024 will occur during the rest of the year, Chief Financial Officer Ramon Fernandez told reporters on a call.

“As a result, the impact of the Red Sea situation on freight rates, however long the conflict lasts, should progressively be absorbed and the shipping market return to the overcapacity seen at the end of 2023,” he said.

CMA CGM’s rivals like Maersk MAERSKb.CO and Hapag-Lloyd HLAG.DE have similarly cited favourable early-year trends and overcapacity risks.

Attacks on vessels by Yemen-based Houthi militants have led shipping firms to avoid the Red Sea that connects with the Suez Canal and use a longer route around southern Africa.

CMA CGM was continuing to send some vessels via the Red Sea with naval escorts but most of its ships were still taking the longer route, Fernandez said, adding that CMA CGM was generally managing to deliver on time.

Results for CMA CGM’s logistics division included its newly acquired Bollore Logistics for the month of March. The division posted quarterly sales of $3.89 billion and a core margin of 9.3%.

Source: Reuters reported by Gus Trompiz and edited by Jane Merriman