Freight News, Sea

Container market could take six months – or more – to rebound from Suez

[ April 30, 2021   //   ]

It could take between four and six months for global container shipping to recover from the blockage of the Suez Canal in March, a shipping consultant told an online conference organised by the Global Shippers’ Alliance on 30 April.

Lars Jensen, chief executive of Vespucci Maritime said it would probably take several months to resolve all the operational issues caused by the blockage. The Ever Given accident was just one of several incidents that had unfolded at about the same time; a boom in demand, vessel and container shortages and port congestion had led to a “domino effect”, he said. The situation was further exacerbated by ships crews having to be withdrawn after Covid outbreaks.

The Suez incident had taken place against the background of a global shipping market that had experienced extreme volatility since Spring 2020. Sharp dips in growth at the time, of up to 20-30% from one week to the next, had encouraged shipping lines to declare blank sailings. But when demand recovered, fuelled largely by a US consumer boom during lockdown, ship operators found that their vessels were not in position to move empty containers back to Asia. This in turn led to port congestion.

In the midst of this already difficult situation, the Ever Given incident occurred, Jensen noted: “In a normal market, it would have taken 2-3 months to work it out of the system” but with services already disrupted, the issue snowballed, soon spreading to other trades that did not pass through the Suez Canal.

Jensen did not believe that the Ever Given incident was particularly exceptional in itself, however. Blockages of key waterways happened all around the world from time to time and there was nothing to suggest that the modern generation of ultra-large containerships was any more susceptible to accidents than other ships. He pointed out that Suez had been used without incident by very large oil tankers in the decades when such vessels were common. “Suez was not a ‘black swan’ event,” Jensen declared. Indeed, even Covid was, to some extent predictable, given that scientists had warned of a major global pandemic for many years. The world of shipping had always had to deal with earthquakes, weather events and other risks.

He pointed out that any shortages of shipping capacity were likely to be temporary. There were enough ships and containers to meet demand in 2019, and the market would move back into balance at some point. However that might not necessarily be before the end of 2021, he suggested.

The Covid pandemic had accelerated rather than caused many of the changes in the shipping market, he added. With the growth of container shipping alliances, the container shipping market was now much less fragmented and carriers were much more easily able to take out capacity when demand dipped – hence the rise in the number of blank sailings in 2018 and 2019.

Over the years, shippers had become used to a market with enormous over capacity, but the future might be one in which freight rates were structurally higher – and this was before the global decarbonisation agenda started to have an effect. The rate hikes resulting from the imposition of low-sulphur fuels would be child’s play in comparison with what was to come.