“Recent events haven’t fundamentally changed our outlook for trade and the timing of any disruptions to the container supply chain. It looks like more of the same for the container market in 2022 with more disruptions, extreme freight rates, and carrier profitability.”.
Taken from Listín Diario
SANTO DOMINGO.– Just as the container market was beginning to normalize and even maritime freight rates were starting to fall, the conflict between Russia and Ukraine and the new blockades in China have begun to complicate the situation again.
The sector is once again in a state of uncertainty that could drive prices up again and cause congestion at ports, according to an analysis by Simon Heaney, senior manager of container research at the consultancy Drewry.
“We don’t believe this is the end of the upward trend in container freight rates, but the market is extremely volatile and things can change very quickly. All these events add to the uncertainty in the container market and have expanded the long list of risks that carriers face,” the expert explained in an article published on March 31.
Heaney notes that the development of tariffs will depend on how long this situation lasts in China and how the economic impact of the war between Russia and Ukraine unfolds.
“Based on market intelligence and customer surveys, we now believe that market normalization will not occur before 2023. China’s adherence to its zero-tolerance public health response to Covid is one of the main reasons why we have forecasted that supply chain recovery will occur later than expected,” he explains.
The expert notes that high-volume ports worldwide were, on average, very congested during 2021, and that this year they are not only not improving, but appear to be getting worse.
Heaney is concerned that more medium-volume ports are becoming congested and that the situation at low-volume ports is also deteriorating.
“Recent events haven’t fundamentally changed our outlook for trade and the timing of any disruptions to the container supply chain. It looks like more of the same for the container market in 2022 with more disruptions, extreme freight rates, and carrier profitability,” he explains.
Other experts
Like Heaney, other Drewry specialists believe that the industry is once again experiencing turbulent times.
Navin Kumar, the consultancy's Director of Maritime Research, explains in another article that due to the current situation, the supply of vessels in some regions will be limited, which, together with a high insurance premium, will drive up freight rates.
“In the short term, demand for tankers for crude oil and chemicals will increase as importers of Russian crude turn to distant suppliers, while importers of sunflower oil will switch to soybean oil supplied by countries located further away than Ukraine and Russia,” the expert predicts.
Kumar indicates that while the war could reduce charter rates for dry bulk cargo ships in the short term by hindering grain and coal exports, in the medium to long term it will have a negative impact on rates even in the crude oil and chemical sectors.
The expert predicts that the war will hinder trade in grains and coal.
Kumar notes that freight rates were weak for much of February 2022, but increased towards the end of the month due to concerns about a possible disruption to Russian oil supplies.
“The conflict has impacted the container sector in two ways: it has resulted in higher oil prices and has led many countries to impose sanctions on Russia to isolate it. The increase in bunker fuel prices is likely to put further upward pressure on freight rates in a market that is already historically high,” Kumar says in his article published on March 17.
Other experts also agree that the ongoing conflict has substantially increased uncertainty in the global container shipping market in the medium and long term.
