Freight News, Sea

Container shipping poses threat to global recovery, says GSF

[ June 2, 2021   //   ]

The shortage of container vessels and equipment is hindering economic recovery in countries emerging from pandemic restrictions, say the Global Shippers Forum (GSF)and MDS Transmodal in their latest Container Shipping Market Quarterly.

GSF secretary general , James Hookham, said that shippers around the world “are in a state of shock” at the collapse of service performance and the remorseless rise in rates. The latest data confirms the anecdotal experiences of shippers struggling to book container slots and absorb the relentless rise in rates that is eroding their own profit margins.

He added that a hidden problem was cargo left behind on the dock: “The fact that industrial output continued to rise over the first three months of the year, but the number of containers carried actually fell slightly shows this is an industry that has ‘maxed out’. This is already causing shortages of products and materials essential to the recovery of economies after the traumas of the Coronavirus pandemic.”

Mr Hookham said that shipping lines were continuing to pump up their prices with further general rate Increases announced in most trades by most carriers.

He argued that world governments urgently need to realise that a rapid economic recovery depended on a resumption of international trade at predictable costs and levels of service.

Chairman of MDS Transmodal, Mike Garratt, said: “Supply and demand conditions in Q1 2021 were similar to Q4 2020 in that while demand fell by 1% and scheduled deployment of global shipping capacity grew by 2% a continuing decline in service reliability and port calls probably cancelled out any marginal benefit to that balance.

“Mean freight rates have continued to accelerate; gross freight revenues per teu have grown by around 40% over six months while spot rates have grown even faster. The lines have argued such rates are a consequence of demand exceeding supply. Given supply is effectively fixed, rising freight rates must imply frustrated demand. Spot rates on the Far East to Europe trade lane are now approximately 10% of the mean value of the goods in a typical loaded container, as compared with around 3% less than a year ago. It is reasonable to assume there will be wider impacts on both economies and there is a risk of stoking inflation.

“Such levels of demand were predictable. By our estimation, over the period Q4 2010 (after the effects of the financial crisis had been played out) to Q4 2017 the mean compound growth rate on global container demand was 3.9% p.a. while the sub total of global deployed capacity grew by 4.1% per annum. It was reasonable to assume the lines would continue to invest in capacity, ordering ships that would be available by 2020 Q4. However, while 2020 Q4 was the busiest quarter ever experienced, the growth rate from 2017 Q4 had actually fallen to 3.4% while total deployed capacity grew at only 2.3% pa. The impact of the pandemic is not to blame for creating exceptional levels of demand, albeit that the dip in demand in early 2020 may have made it difficult to anticipate.”

The Review reported on eight performance indicators of the global container shipping market using publicly available data for the first quarter of 2021. The data is unaffected by the closure of the Suez Canal on 23 March for six days, but the effects of this on trade and shipping in the second Quarter of this year will be captured in the next Review on 1 August.