The shipping industry makes history with record breaking figures
The shipping industry demonstrates some record breaking activity. Record ocean freight rates, record poor schedule reliability and record profits for carriers. A situation that shows no signs of easing up and spells trouble for the busy ‘seasonal’ period ahead.
Record ocean freight rates
In September, the shipping industry’s main global ocean freight indexes reported consecutive rate increases for the sixth month running. For the first time ever, the Drewry index broke the $10,000 USD price tag for a 40ft container, whilst Xeneta’s short term rates index was four times higher than in January 2020.
Record poor schedule reliability
During July and August, on-time performance took a summer holiday and fell to a troublesome -35%. Why? Continued and extreme after effects from:
Record profits for carriers
So whilst world trade is under massive strain, and the supply of materials and goods unable to meet demand, container shipping lines are very much benefiting from, well everyone’s misfortune.
Maersk published its 2021 full year EBITDA expectation at a jaw dropping 22-23 billion USD! Whilst this sounds unfair and somewhat immoral, it is actually a positive for all of us. Profit leads to investment and the shipping industry needs to further invest not only in fleet and assets, but also into the next generations of greener energies that ocean vessels will have to comply with in the years ahead. We can only hope port infrastructure and haulage receives a likewise injection of funds.
So then did high freight costs, surcharges and service disruption become the norm? Late 2019, the start of the Covid-19 outbreak, made carriers pull capacity from the seas, and in May 2020 around 2.7 million TEUs were sitting idle. What followed, is the cause of where we are today…
The sudden upturn in demand from the US in the third quarter 2020, initiated the market disruption. At that time, shipping lines were hesitant to redeploy their assets and the slow introduction of the idled container fleet bore the situation we’re still unable to exit today.
It’s not news to know ports around the world are struggling. The average waiting time for vessels currently exceeds 7 days and approx. 70% of global container shipping vessels are late in accordance to their planned schedules. As of October 10th, in excess of 300 vessels around the world were queuing to berth at port. Close to sixty in Los Angeles / Long Beach alone!
13% of the World capacity was absorbed by delays (August 2021)
What to expect next…
Including their order book, the top eight ocean freight shipping lines, organized in 3 alliances, still control close to 85% of the World’s capacity. The injection of capacity to help the global container shortage and vessel capacity expected in 2022 looks pretty low. Lower than in 2021 in fact, and certainly lower than container demand growth expectations.
Shippers should focus on...