Container market to remain tight through 2022: Drewry
Published on JOC.com (https://www.joc.com)
Author: Michael Angell, Associate Editor Oct 20, 2021
The supply/demand balance in ocean transportation is likely to remain tipped in favor of carriers until the end of next year, according to Drewry, as new ships entering the global fleet are offset by the supply chain snarls that continue to tie up capacity.
Drewry senior manager Simon Heaney said the maritime consultancy originally pegged the second quarter of 2022 for when supply chain bottlenecks would ease. But Heaney said the bottlenecks show little sign of lessening and ship capacity will remain tight through most of 2022.
To be sure, 2022 will see some easing in the market, Heaney said. After spiking to nearly 15% in the second quarter, Drewry expects global shipping demand to average 5.2% for 2022.
COVID-19, though, still presents the most risk to that forecast, Heaney said. China shut down container terminals due to outbreaks and the potential for the Delta variant to spread raises the risk of more shutdowns and problems in the supply chain.
COVID-19 “still carries the greatest uncertainty,” Heaney said, adding that the problems related to trucking, rail, terminal, and warehouse capacity are all contributing to a worsening outlook for container markets.
“Rising Delta cases increase the risk of further constraints on logistics capacity,” Heaney said. “The problem goes deeper than feared and the pandemic has accelerated crises in other sectors.”
As a result of the bottlenecks, global ports will not be handling as many containers as previously forecast; global port throughput will rise 8.2% in 2021, down from a previous forecast of a 10.1% increase for the year.
The severe vessel delays seen at US ports and the specter of inflation eating into consumer and business spending were behind the forecast decrease, Heaney said. Some marginal freight is also being priced out of the ocean transportation market due to average freights having risen over 126% from last year, he added.
“The bottlenecks have gotten longer, and economic prospects have gotten dimmer,” Heaney said.
Many of the container ships on order are not expected to arrive until 2023, Heaney said, with Drewry forecasting global fleet growth over 7% while global port throughput drops to close to 3%.
Heaney said ocean freight rates are likely to drop due to the new supply. However, with global ocean carrier profitability forecasted to hit $300 billion combined for 2021 and 2022, “the question is whether the carriers will even care due to having two years of previously unthinkable and outlandish profits,” he said.