Could container shipping rates stay this red-hot until 2022?
Source
American Shipper
Post Date
04/22/2021
Container-shipping spot rates keep bouncing around at stratospheric heights ¡ª and show zero signs of sliding back to earth. On some trade lanes, they¡¯re still ascing. Case in point: The formerly sleepy Europe-U.S. trans-Atlantic route just spiked.
With fallout from the Ever Given accident in the Suez Canal expected to cut container and vessel availability, the ¡°when will this ?¡± chatter is starting to fixate less on the second half of 2021 and more on 2022.
This is the season ¡ª in a normal year ¡ª when rates moderate. While different freight indices offer different numbers, the tr lines are all the same: either up or steady at the peak.
Trans-Atlantic surge
In the U.S. markets, the biggest rate move this month is in the westbound trans-Atlantic trade.
Judy Levine, head of research at Freightos, attributed the spike to ¡°strong demand and scarce capacity.¡±
On April 1, Hapag-Lloyd announced a booking suspension on eight sailings leaving Northern Europe for the U.S. in the first half of this month due to ¡°an overbooking situation.¡±
Levine also speculated that the recent disruption of services through the Suez Canal could be having ripple effects on the trans-Atlantic.
Asia-US rates peaking yet again
Many U.S.-based cargo shippers also move considerable volumes on the Asia-Europe route. However painful Asia-U.S. rates are, the Drewry indices highlight how much more painful the situation is for Asia-Europe shipments.
The spot rate for Asia cargoes to North Europe is now up 396% year-on-year, with rates to the Mediterranean up 317%. In contrast, Drewry estimates that rates from Shanghai to New York and Los Angeles are up 133% and 153% year-on-year, respectively.
What¡¯s next?
The current rate boom has defied the predictions. In mid-2020, multiple commentators thought demand would peak in August or September and fall off in the fourth quarter. It didn¡¯t. Then came fears that winter COVID lockdowns would hamstring consumers. That didn¡¯t happen either. Analysts also speculated last year that rates were due to a one-off restocking event after the initial lockdowns in Europe and the U.S. in spring 2020. But even now, stores are still restocking and inventories are still low.
U.K.-based consultancy Drewry said in a research note on Friday, ¡°Using history as the only guide, the smart bet would be to think that the market will cool down quickly. But these are not normal times. We argue that carriers are set up nicely for at least another two very profi years [2021 and 2022].¡±
According to Drewry, the two drivers of stratospheric rates ¡ª the COVID-propelled shift to goods consumption and supply chain disruptions ¡ª ¡°are stubbornly refusing to go away. The timeline for a ¡®return to normal¡¯ keeps getting pushed back.¡± Drewry expects port congestion and equipment shortages to persist through 2021 and for carriers to lock in profits into 2022 via higher annual contract rates signed this year. ¡°Things might not be so easy for carriers post-2022,¡± said the consultancy.
For shippers who¡¯d once hoped for rate relief in Q4 2020, a fore for market conditions getting tougher for carriers ¡ª and thus better for cargo owners ¡ª in 2023 is a frightening prospect. If there¡¯s any solace for shippers, it¡¯s that fores during the COVID era hav
