Container rates to enter volatile period

The spot rates will witness extreme swings coupled with anticipated volatility in 2022.

The global container shipping industry is entering a period of volatility that will extend long after the current peak shipping season, with a return to pre-pandemic market conditions almost certainly out of reach, according to consultancy Vespucci Maritime CEO Lars Jensen, quoted in S&P Global Platts.

“Bottlenecks causing severe congestion throughout the supply chain in North America will eventually be reduced, but that will likely happen in no less than six months from now and more likely in the second half of 2022,” said Jensen recently at an event.

“Initial easing may precede a period of reverberation where ship capacity trapped by congestion is released to load cargoes in Asia, only to begin bunching up again at import destinations and driving rates higher, at least until the latest wave of ships orders hit the market, starting in 2023.” Jensen said.

The spot rates will witness extreme swings coupled with anticipated volatility in 2022.

“This will make risk management in contracts more important going forward,” Jensen added. “Shippers and carriers will both need to take more consideration what level of volumes they want to put into mutually committed contracts and how much exposure they want in the volatile, but flexible, spot market.”

Platts Container Rate 13 — North Asia to West Coast North America — was last assessed at $8,800/FEU October 21, down from $8,950/FEU last week and the all-time high level of $9,000/FEU at the start of October, as more ships were put into service on the trans-Pacific trade lanes. But the downturn was tenuous amid escalating gridlock at US West Coast ports and nodes of inland transport.

A Maersk spokesperson, said: “Freight rates are a function of demand and supply. In global trade, we are seeing a rising demand for the flow of goods, but the supply of capacity to move these goods is limited and not growing at the same rate. This has caused an imbalance in the availability of empty containers. In addition to that, the Covid-19 pandemic has caused several bottlenecks in the global logistics ecosystem that has led to several containers getting stuck in supply chains and turning around slowly. With the supply of containers being limited and demand being high, we are witnessing that the freight rates are getting impacted.

However, it must be noted that the variance in freight rates only applies for short-term contracts that are for less than 3 months. All our long-term contracts with our customers have fixed rates decided while signing the contract and these rates are respected through the period of the contract. Long-term contracts create a win-win situation for both customers as well as shipping lines. While the customers get assured freight rates, shipping lines get visibility on a longer-term for better planning the logistics and improving predictability and reliability of supply chains.

“We are committed to realising our business transformation and becoming a full-service end-to-end integrator of container logistics In this pursuit, we are moving towards a larger share of long-term contracts, which now has increased to around 60 per cent of our total bookings.”

Deepak Bhatia, managing director, Uncle’s Shop, said: “The constant hike in container prices and ocean freight has impacted business severely across all sectors. The building material and construction industry has impacted ongoing and upcoming project costs. It is anticipated to continue for the next 12 months, we might see a marginal drop post the Chinese new year.”