Container ship markets are still enjoying “exceptional” conditions despite some headwinds and a fall in trade.
That's according to Clarksons Research analyst Trevor Crowe, who said that the near-term outlook remains highly positive for container shipping owners.
“Vessel availability is still scarce, and crucially port congestion shows no sign of material easing,” he said.
It is 19 months since the Shanghai Containerized Freight Index (SCFI) first moved into new record ground and 13 months after the charter market passed the previous 2005 record high.
“Despite growing headwinds facing trade volumes, the container shipping markets (and costs for shippers globally) remain firmly in exceptional territory,” Crowe said.
Though some easing has been apparent, severe port congestion continues to drive major market “disruption upside," he noted.
In 2021, the perfect storm of a firm rebound in volumes — up 6.3 percent after the initial impacts of COVID-19 in 2020 — major logistical disruption including severe port congestion, and moderate supply growth, drove the markets well beyond previous record highs.
So far in 2022, container trade has taken a step back, with volumes 2.4 percent down year-on-year between January and April, according to Clarksons Research figures.
This is still up 4.3 percent over 2019, however.
“Port congestion has not only mitigated the impact but also maintained markets at spectacular levels,” Crowe said.
Clarksons’ container ship port congestion index averaged 36.5 percent of capacity at ports in May, close to the October 2021 record of 37.1 percent and about five percent above the 2019 pre-Covid average.
Impacts from the Russia-Ukraine conflict, COVID restrictions in China and ongoing disruption elsewhere have all contributed, reducing available capacity.
Though benchmarks vary, container spot freight rates remain relatively close to the record highs seen in early 2022, far ahead of pre-COVIDlevels, Crowe explained.
Seafood companies, like businesses in many other industries, have suffered from runaway shipping rates linked to the global container shipping crisis that began with the onset of the COVID-19 pandemic in early 2020.
Still well above 2019
The key Shanghai Containerized Freight Index (SCFI) indicator averaged 4,162 points in May, having eased 18 percent lower than in January 2022, and the lowest level since July 2021.
But this is still five times the 2019 average, with some reports of long-term rate ideas still firming.
The container ship charter market has remained even closer to the peak.
Clarksons Research’s time charter index hit a new record of 434 points during March.
The average across May stood at 422, just 3 percent lower, and an “astounding” seven times up on 2019, Crowe said.
“Of course, demand side headwinds are building,” he added.
The analyst pointed to macroeconomic pressures growing, with 2022 global GDP forecasts cut by more 1 percent compared to before the Ukraine war.
Inflation is driving a cost of living crisis affecting consumer activity, Chinese lockdowns are having an effect and some consumer spending is switching back to services.
- Reefer: Refrigerated container
- teu: 20-foot equivalent unit used to measure container sizes
- feu: 40-foot equivalent unit used to measure container sizes
- Panamax vessel: The maximum size of a ship that can transit the Panama Canal, ranging in length between 200 and 250 meters (650 and 820 feet) wth capacities of 50,000 to 80,000 dry weight tonnage.
This all weighs on box trade, with Clarksons’ 2022 container cargo growth forecast downgraded to 1.3 percent from an initial 3.8 percent in January.
Looking further ahead, following record ordering of 6.5 million teu since the fourth quarter of 2020, the orderbook is now 29 percent of fleet capacity.
Supply growth is set to accelerate, with Crowe projecting 8.3 percent in 2023 and 7 percent in 2024.
“At some stage one might reasonably expect to see some congestion unwind, easing capacity shortage,” he said.
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