Ocean Freight Market Update - December 2021

Updated: Feb 18, 2022

The latest edition of Ocean Freight Market Update - December/2021.

Highlights
Focus
Trade route analysis

Highlights

Port congestion is still a significant concern for the shipping industry and impacts schedule reliability and equipment availability.

According to analysts, about 12 % of the global fleet is currently cancelled out due to waiting times at major ports, that is more than 560 vessels at mid-November.

The average waiting time for a port call has increased by 59% in the first nine months of 2021, compared with the same period in 2019. As peak season has passed, spot rates have been slowly stagnating since the end of October.

According to Drewry, spot rates will probably decrease through next year but will still remain at high levels. Moreover, the trend is likely to reverse in early January with expected pre-Lunar New Year rush. High spot rates are feeding into strong contract rates.

Considering that there is mounting evidence that short-term rates may be waning, and that huge numbers of ULCVs on order will be delivered from 2023 onwards, carriers have been busy locking into long-term contracts at elevated rates shippers which, as for them, are anxious to secure space, equipment and timely arrival.

Demand growth forecast for 2022 is a risky exercise.

Although the global GDP outlook remains strong, demand could be eroded by rising prices, looming energy crisis and a reduction in government financial support.

In their Q3 2021 Container Forecaster, Drewry analysts highlighted that “tight shipping capacity conditions are expected to remain through to the end of 2022 and may linger longer still, as Covid-19 outbreaks continue to threaten disruption to key logistics hubs.” and that “Global container shipping networks are so stretched that even minor disruption in one part of the world can set off a chain of unintended consequences across global supply chains.”

Service

Schedule reliability recorded another marginal improvement in November 2021, maintaining the range of 34%-40% that we have seen throughout the year.

The average delay for late vessel arrivals also recorded a slight improvement, decreasing by -0.09 days M/M to 7.34 days. That said, the level of delays in 2021 continue to be the highest across each month when compared historically.

Ocean carriers, obliged to temporarily omit severely congested ports during the current supply chain disruptions, are rethinking their network coverage in favour of a permanent change to fewer hubs. For instance, Hapag Lloyd aims at simplifying its network which has become too complex over years of trade evolvement and acquisitions, thereby cutting costs by using fewer hubs in order to improve quality of service. Nevertheless, as member of THE Alliance, the carrier has to reach an agreement with its partners prior to this.

Shipping industry

Major ocean carriers are to make astonishing and unexpected profits.

After reporting even better-than-expected profits for the third quarter, they are being forced yet again to upgrade full-year earnings forecasts. The cumulative profit for the liner industry could be nearer to $200bn, that is double the profit made by carriers in the past 20 years. Unprecedented earnings for container shipping in Q3 see the industry outpacing the world’s largest tech giants in terms of Q3 profitability.

Unsurprisingly carriers do not lack ideas to spend these huge revenues.

Investment in the containership orderbook is the highest it has been in nearly 15 years. According to Drewry, fleet growth will still lag behind demand growth in 2022 but there is a risk of returning to overcapacity from 2023 onwards when recent orders start to be delivered.