COVID, Supply-Chain Disruptions to Slow Global Growth Through 2023

The World Bank is forecasting lower global economic growth in 2022 and 2023, downgrading growth from 5.5% in 2021 to 4.1% in 2022 and slowing further to 3.2% in 2023. The bank points to the effects of ongoing coronavirus outbreaks, supply-chain bottlenecks, labor shortages and reduction in government economic support and warns of the risk of a “hard landing”.

According to the bank’s Global Economic Prospects report released on January 11, it is projected that the U.S. economy will grow 3.7% this year, down from 5.6% in 2021. Growth in China will ease to 5.1% in 2022 from 8% last year in part due to lingering effects of pandemic as well as additional regulatory tightening from Beijing.

The 19 European countries that share the euro currency are expected to collectively grow 4.2% this year, down from 5.2% in 2021. And Japan is forecast to register 2.9% growth in 2022, up from 1.7% last year. Emerging and developing economies are forecast to collectively grow 4.6% this year, down from 6.3% in 2021.

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Source: Transportation Topics

Global Port Congestion Persists in 2022

Congestion and bottleneck challenges are worsening going into 2022. Data from maritime analyst Sea-Intelligence shows there will be no improvement yet. Demand grew 7% year-on-year in 2021 while capacity has been effectively reduced by -11%.

Sea-Intelligence’s calculated terminal congestion index for North America reached a high on 30 December but improved slightly for 6 January driven by a better situation in Savannah and Charleston (see Figure 1). Congestion in Europe has been worsening since the start of October with no sign of improvements or levelling out (see Figure 2).

“This also implies that we might well expect to see a continued upwards push on freight rates on this trade, as the congestion is likely to have a negative impact on reliability, and hence in turn on available capacity,” Sea-Intelligence pointed out.


Source: Sea-Intelligence 

Shipping Costs Expected to Stay Elevated

Shipping costs in 2022 will be “higher than ever before” and container lines’ favorable position in long term rate negotiations and shippers’ desire to secure capacity will culminate in higher long-term rates, Peter Sand, Xeneta’s chief rate analyst forecasted. He added that even if spot rates soften over the year, the average cost of shipping would still be elevated beyond normal.

Sand said fronthaul long-term rates look set to double or triple from their year-ago levels. Long-term backhaul rates have seen a smaller increase of 12% over the same period. Spot rates on the Far East to North Europe and Far East to Mediterranean routes have risen 6% and 2% respectively. Backhaul rates from North Europe to the Far East dipped -5% over last month but remain above pre-pandemic levels (see Figure 1).

Source: Seatrade Maritime News

Shipco: U.S. Trucking Capacity Update

There are no indicators that port congestion on the West Coast will be easing. More than 100 vessels are waiting over 20 days to find a berth to unload.

The net result for the truckload sector has been higher freight volumes in major port markets, including the ports of Long Beach and Los Angeles, which handle 40% of all U.S. container imports.

DAT has recorded higher sequential spot rate increases for the last 12-months on long-haul lanes, such as Los Angeles to Chicago. Spot rates for loads to Elizabeth, NJ were higher at the end of 2021 than the monthly average for December 2020.

Truckload capacity is tightest from Los Angeles to the large e-commerce warehouse market of Stockton and has also been steadily tightening in Chicago.

The dry van load-to-truck ratio has spiked to its highest end-of-year level in five years due to reduced services over the holiday period.

Continue to expect one to two days delay for LTL shipments in areas shaded in red (see Map 1).


Source: Shipco Transport

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