Search By Topic The Green Supply Chain Distribution Digest
Supply Chain Digest Logo

Category: Global Supply Chain

Global Supply Chain News: Ocean Container Carriers Expected to See High Rates and Profits for at Least the Rest of 2022

 

 

Port Congestion and Low Productivity is Key Factor in High Rates, Drewry Says

 

April 5, 2022
SCDigest Editorial Staff

Since a few months after the start of the pandemic, ocean container carriers have seen shipping rates and thus their profits soar to record levels.

Supply Chain Digest Says...

 

So, taking everything into consideration, Drewry does believe that market rates will return to more normal levels before 2023.

 
 

What do you say?

 
Click here to send us your comments  
   
Click here to see reader feedback  

2021 was a blowout year for the container lines, with an estimated profit of a huge $214 billion, as measured by earnings before interest and taxes (EBIT), according to the maritime analysts at Drewry. And 2022 could be almost as strong, in bad news for shippers, despite all the headwinds that could reduce demand.

Those include geo-political risks (e.g., Russia-Ukraine war), inflation, a potentially wobbly world economy, growing regulatory scrutiny (stemming for soaring rates and container demurrage fees), growing fuel and ship chartering costs, the on-going COVID-related factory and port closings in China, and more.

Still, Drewry says it doesn’t “think this is the end of the bull run for container freight rates, but the market is extremely volatile and things can change very fast,” adding that how rates develop will depend on how long this situation in China lasts, and also how the economic impact of the Russia-Ukraine war pans out.

But carriers have one factor that is greatly in their favor – on-going port congestion. In fact, Drewry estimates that effective container ship capacity (the number of slots available to the market) was some 17% below its potential in 2021 (on the basis that port productivity was at pre-pandemic 2019 levels), with a similar gap expected for 2022 , as shown in the graphic below:

 

 




(See More Below)

CATEGORY SPONSOR: SOFTEON

 

 

 

 

It can’t be stressed enough, Drewry says, port congestion and low productivity rates are "the foundation for carriers’ super-profits and the sole reason why they have largely brushed off all of the various risks encircling them.”

Drewry adds that high-volume ports around the world, on average, were heavily congested throughout 2021, and not only are conditions not improving, they appear to be getting worse. Drewry sales it is also seeing more medium-volume ports becoming congested, with congestion at low-volume ports is also deteriorating.

So, taking everything into consideration, Drewry does believe that market rates will return to more normal levels before 2023.

“Recent events have not fundamentally changed our outlook for the trade and the timing of any unwinding in container supply chain disruption,” Drewry concludes, adding that “It looks like more of the same for the container market in 2022 with more disruption, extreme freight rates and [high] carrier profitability.”


What are your thoughts on Drewry's anaysis? Let us know your thoughts at the Feedback section below

Your Comments/Feedback

 
 

Features

Resources

Follow Us

Supply Chain Digest news is available via RSS
RSS facebook twitter youtube
bloglines my yahoo
news gator

Newsletter

Subscribe to our insightful weekly newsletter. Get immediate access to premium contents. Its's easy and free
Enter your email below to subscribe:
submit
Join the thousands of supply chain, logistics, technology and marketing professionals who rely on Supply Chain Digest for the best in insight, news, tools, opinion, education and solution.
 
Home | Subscribe | Advertise | Contact Us | Sitemap | Privacy Policy
© Supply Chain Digest 2006-2021 - All rights reserved
.