Container market won’t stabilise until 2023, Drewry reports

Date Added: 3 May 2022

Container market won’t stabilise until 2023, Drewry reports

With a comprehensive portfolio of ocean freight forwarding services around the globe, Davies Turner notes reports in international trade media that maritime consultancy, Drewry believes the global container market will not level out until 2023, with carriers and their customers having to struggle with at least another 12 months of lengthy delays and high freight rates.

Sharing the results of the company’s First Quarter 2022 ‘Container Forecaster’ report, Simon Heaney, Drewry’s senior manager of container research said that carriers’ ability to charge customers extremely high freight rates is dictated by the duration of supply chain bottlenecks, which remain highly unpredictable.

The report downgrades the outlook for global port handling, and saw significant increases in freight rates and carrier profits.

Heaney said in terms of profitability, carriers are concerned with the pandemic-related issues in China, whether the impact will mainly affect the factories, ports, or terminals.

“We have to say that Covid-19 has been exceptionally good for carrier profitability. From a logistics perspective, the primary side effect has been to create capacity shortages in virtually every link of the freight transportation network at a time of very high demand,” he said.

“Any new factory shutdowns or slowdowns in China spell bad news for carriers, as it will forcibly choke off demand for their services, potentially inadvertently correcting some of the capacity shortage problems that we’ve been experiencing for the last couple of years. The sweet spot for carriers is for logistics congestion to be bad, but not so bad that it interrupts the flow of goods out of the factory gates.”

Heaney said there is a grouping of risks at play in the current global geopolitical situation, and the biggest uncertainty comes from not knowing how those various risks will interact. The Russia-Ukraine war and China’s zero-Covid policy are currently uppermost on the list of risks, with a high level of uncertainty.

The report says a prolonged war in Ukraine will put a drag on global economic growth and reduce container demand, thus container supply chain recovery. Combined geopolitics and pandemic-related risks will weaken consumer and business confidence, while fast-rising inflation might reduce goods consumption.
New congestion woes

However, China’s zero-Covid strategy could aggravate container deadlocks, reducing logistics capacity and consequently causing a decline in manufacturing and container shipments.

The data show that ports were heavily congested in 2021, and according to Heaney, things are not improving now. While larger ports deal with major issues, the problems trickle down to smaller ports as more ships are diverted in search of clear gateways. Previously medium and low volume ports are now becoming congested. The most recent example is the congestion spreading from Shanghai to Ningbo in China.

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