2022 to be bigger & better for container carriers as volatility continues

November 27, 2021: Container market continues to show volatility due to supply chain disruptions caused by port congestion, trucker shortages and changes in demand, Maersk said in its latest Asia Pacific market update.

"Global container demand growth moderated to 2 percent in Q3, slightly lower than the 2.5 percent increase forecast, and down from double-digit growth rates in H12021. Growth in Q3 was mainly driven by Latin America where trade grew 14 percent year-on-year and North America which saw a 4 percent increase supported by technology products and retail goods. North America container imports from Asia rose 2.7 percent in Q3, while European container imports from Asia fell 3 percent due to a drop in consumer demand," the report said.

Demand growth is likely to moderate compared to 2021, supported by strong demand from the U.S while the outlook is more uncertain in Europe. "We continue to see ocean capacity impacted by port congestion and vessel delays with around 12 percent to 15 percent of global container ship capacity effectively taken out of the market. But we also see an improvement in equipment availability in Asia."

Challenging times ahead

"In terms of pricing for the first time in history, maybe that could be secondary to getting stability and predictability into those global supply chains even though negotiations are likely to be as tough as they can going into the tender season on some of the key traits mainly the Far East to Europe right now," Peter Sand, chief analyst, Xeneta, said in a webinar recently.

"Going back, almost 12 or 10 months ago that I said something like, "Well, look at these spectacular profits for liners in 2021." Trust me on this one. 2022 is going to be even bigger. We just had a little brief into that on the Q3 now. It all rests on the assumption that carriers are now fixing long‑term contract rates at a much higher level than what they delivered in 2021."

What should shippers know to cope with the upcoming tendering season? Other key highlights from the webinar:

• Xeneta data says 2022 contract market container rates to be even higher than in 2021.
• Significant spread of contract market container rates for the trans-Pacific across different shipping lines with up to $7,000 difference.
• Currently a good opportunity for shipping lines but the worst scenario for shippers to enter into a new long‑term agreement; and  
• An index‑linked contract rate might be a necessity in the current situation due to all‑time high levels.

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Watch China power shortage
Key manufacturing areas in China including Guangdong, Jiangsu and Zhejiang have been affected by electricity rationing with about 20/31 provinces having been impacted to varying degrees. The shortages have been caused by several factors including high coal prices, unpredictable weather patterns and the introduction of tougher emission norms, the Maersk report said. 

"While China has increased coal production and some of the restrictions eased in early November, Maersk has identified measures to mitigate disruption to supply chains. 

• Continually monitor the supply situation so manufacturing and logistics schedules can be adjusted; and  
• Stay in regular contact with local vendors and partners, who will be able to best monitor the local electricity distribution plan so disruptions to supply lines can be addressed earlier.

"We expect space to remain tight throughout Lunar New Year due to capacity reductions caused by port and vessel delays. The equipment situation is improving as we have continued to in-fleet containers and get more empty equipment back to Asia. We still see shortages in some locations in the lead up to Lunar New Year, but the situation has improved from last update," the report said.

Anne-Sophie Zerlang Karlsen, Head of Asia Pacific Ocean Customer Logistics, Maersk said: "Restoring reliability for our customers supply chains continue to be our highest priority in Maersk – it is a difficult environment where congestions continue to intensify in many of the key ports, but Maersk will continue investing where it has the largest impact for our customers."

Strong air cargo demand from Asia to the U.S. and Europe is expected to continue in 2021 and into 2022, resulting in tight capacity. "The main issue for air cargo is the significant congestion on supply chains. We’ve seen terminal congestion in some airports in Korea, China and Japan which results in long delivery times and delays."

Meanwhile, Drewry's composite World Container Index was steady at $9,186/FEU but remains 224 percent higher than a year ago.

Freight rates on the Shanghai–Rotterdam and Shanghai-New York routes gained 1% each. Rates in Rotterdam–Shanghai, Shanghai–Genoa, Shanghai–Los Angeles, Los Angeles–Shanghai and New York–Rotterdam were steady.

"Drewry expects rates to remain steady in the coming week," the report said.