Prognoses for the container market in 2022
27 September 2021
2021 was a turbulent year. We are all curious what 2022 has in store for us. ‘Will things get back to normal again soon?’ That’s a question our Team is asked on a daily basis. But what is ‘normal’? Back to the time before COVID19? Various leading financial institutions and magazines have looked into this matter. Based on their prognoses, we hereby present to you the expectations for the container market in 2022.
Current rates and shortages
Since late 2020, sea freight rates have been sky high, and they have continued to rise. There seems to be no end to it. The various lockdowns, persistent capacity shortages and the container scarcity in Asia. All of this is leading to a market that persistently fails to restore its balance. On top of that, the Port of Rotterdam is seriously struggling to process all cargo.
Take September and October, for instance. They are not generally the busiest months for the logistics sector. Nevertheless, we are struggling to process all cargo. With the Golden week approaching, things are unlikely to improve any time soon. But what are the expectations for the period after this? Or, as we are regularly asked: ‘When will things get back to normal’?’
Expectations in the area of transport
China is determined to completely eradicate COVID. As a result, ports are closed abruptly. Every little instance has an immediate effect on the production process. By now, reserves have run out. Because of this, manufacturers have become fully dependent on the import of new raw materials.
Exporters in Indonesia and Vietnam are also suffering from the Delta variant outbreak. On top of that, these countries are struggling with manpower and capacity shortages.
Port congestion and container transport shortages. These may persist in the fourth quarter or even till mid 2022. If the pandemic is not curbed rapidly, port congestion may become the new standard.
Financial prognosis container market 2022
Shipping costs for a container from Asia to Europe are now 10 times higher than they were in May 2020. The costs for the Shanghai – Los Angeles route have increased sixfold, according to the Drewry World Container Index. These cost increases will need to be compensated for elsewhere, and, as a result, product prices will rise significantly.
The increased shipping rates will lead to increased inflation. In the United States, forecasters have lowered the growth prognoses. The inflation expectancy for 2022, conversely, has increased. Compared to 2020, consumers are expected to spend more. Expenses are predicted to rise by 4% in the third quarter. In the fourth quarter, the estimated rise in expenses is 4.1%.
Contracts and rates What can you expect from 2022?
Large retailers and shipping companies make long-term agreements. In the past, this offered certain guarantees. The capacity for these contracts is currently likewise highly limited. On top of that, existing short-term contracts are still used. However, the majority of deals are now made against ridiculous prices. The market currently looks rather like an auction.
Shipowners sell to the highest bidder. As a result, smaller suppliers in Asia suffer. More than ever, they depend on their network of agents and forwarders. For producers outside of China, the problem is even more serious. Many Chinese companies are willing to pay the demanded rates. This means that, once ships leave China, they are often almost completely full already.
This prognosis is that this may continue until the Chinese New Year in February 2022.
You can read the entire article from the The Sydney Morning Herald here.
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