Market Forecasts See Supply Chain Disruptions Extending into 2023

There is growing agreement in the maritime industry that current supply chain disruptions will persist throughout 2022. Alphaliner reported a 26% surge in container ships purchased in 2021, the equivalent of 1.94 million twenty-foot equivalent units (TEUs). In the charter market, rates have reached record highs. Alphaliner said liners have acted to secure tonnage before current charters expire and for up to five-year durations. The confidence shown by the industry strongly implies a market decline is not on the horizon.

Matson’s CEO, Matthew Cox, said last month he expected Trans-Pacific congestion and consumer demand trends to persist through the October peak season at minimum. He added there would be elevated demand for its China service for most of the year. Zim’s CFO Xavier Destriau indicated in August 2021 that overcapacity threats from newbuilds scheduled for delivery in 2023 and 2024 were unwarranted. “Congestion of land infrastructure, particularly in the U.S., will continue to adversely impact fleet efficiency. Operational constraints in the U.S. are likely to persist,” and “landside bottlenecks” would “partially offset the net fleet growth reflected in the increased orderbook,” he said.

While the Biden administration and the ports continue to focus on ways to ease the supply chain crunch, it remains to be seen if any significant progress is possible until U.S. import demand reduces considerably. If supply chain pressures and port congestion persist into 2023, it would mean a lengthier period of much higher transport costs and much longer transit times for cargo shippers. Congestion at U.S. ports have worsened compared to a year ago. As of February 1, 2022, there were 101 container ships idling offshore and waiting for berths at the ports of Los Angeles and Long Beach, up from 40 in 2021 (see Figure 1).

Source: American Shipper


Air Cargo Market Remains Resilient Despite Challenges

The air cargo market should be cautious about drawing conclusions based on January’s market performance, said Niall van de Wouw, chief airfreight officer at Xeneta. Aside from the uncertainties caused by COVID, the aviation industry encountered added challenges brought on by 5G concerns in the U.S., winter weather episodes impacting flight schedules and an earlier-than-usual Chinese New Year in 2022. “Measured against all these factors, January’s performance shows there is still a good degree of resilience in the global air cargo market,” van de Wouw pointed out.

CLIVE Data Services, now owned by Xeneta, reports that year-on-year, chargeable weight saw a 0.1% increase in January. And despite fragility in the global airfreight supply chain, volumes were up 0.2%. Cargo capacity was up 6% versus January 2021 and rates are 41% higher compared to a year ago (see Figure 1).

Shippers waiting for a rate reduction that typically follows the Chinese New Year peak will not see significant discounts due to already weaker than expected rate levels out of China on top of a shortened peak period. Payton Burnett, MD of the TAC Index said after the Lunar New Year holiday, production of general goods will ramp up. Key shipments, much of which are COVID test kits will end up competing for capacity with general goods in February and March.

Source: The Loadstar


European Road Freight Price Index at Record Highs in Q4 2021

According to the latest Road Freight Rate Benchmark published by Transport Intelligence (Ti) and Upply, high prices across Europe have been driven by driver shortages, rising fuel costs, supply chain congestion and a supply-demand imbalance. The Benchmark index stood at 108.3 in Q4 2021, higher by 1.1 points than in Q3 2021 and 3.2 points higher than in Q4 20. It marked the sixth consecutive quarter of rate increases across Europe. Upply CEO, Thomas Larrieu, said road freight rates in Europe showed no signs of abating in the near term and warned that shippers could expect further increases this year.

Vincent Erard, the International Road Transport Union’s (IRU’s) Director of Corporate Services, said driver shortage was a big challenge as Europe’s economies recover and the demand for transport services increases. Data from the IRU reports that in 2021, the U.K. had up to 100,000 driver posts unfilled. Germany and Poland faced driver shortages of up to 60,000, France was missing 31,000 drivers while Italy and Spain each faced shortfalls of 20,000 drivers. Additionally, rising fuel prices were also putting transport operators under pressure. Fuel costs which account for one-third of total operating costs have risen by 25% year-over-year in countries across the region.

Freight rates are expected to remain high in Q1 2022 as demand stays strong, costs high and capacity constrained. “Heightened demand and restricted supply look set to remain over the coming months, likely insulating rates from a traditional Q1 dip from peak season levels,” said Nathaniel Donaldson, economic analyst at Ti.

Read the IRU press release

Source: The Loadstar

1 Comment to “ ShipcoWeekly, No. 4”

  1. Mark says :Reply

    Thanks for your blog, nice to read. Do not stop.

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