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The shipper’s dilemma: Stick or twist?

[ December 16, 2021   //   ]

A new trend is emerging in shipping with some lines wanting to fix multi-year deals, says Europa Air & Sea national sales and procurement manager, Miles O’Donnell. In many instances the new deals are five or six times higher than pre-pandemic levels, he adds.

This is putting shippers in a quandary. There is no new vessel capacity on the horizon  and, compared with March 2020’s low prices, freight rates from China to the US and Europe have risen by 300%.

An additional challenge is that new deals are not being offered to everyone as the lines continue their stance that 2022 will follow much the same trends with port congestion, void sailings, regional lock downs in the Far East and equipment displacement challenges.

But he adds: “Looking much further ahead we know that there will be additional capacity in the market in 2023.” However these aren’t expected to enter the market until March of that year and there will be a slow phase-in for the following 18 months.

It was also reported in the autumn that high demand and spiralling energy costs are forcing some Chinese factories to reduce their working hours. While this adds yet more problems to the supply chain, it could  reduce shipping demand.

O’Donnell says: “The challenge for all customers is to weigh up potential changes in the sector and then decide whether fixing offers the best long-term benefit.”

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