Whilst many of us were hoping that supply chains would see a return to normality by the end of the year, analysts have predicted that the current crisis is unlikely to normalise before the end of next year. The latest Container Forecast Report from maritime research experts, Drewry, warned that “Supply chain turmoil will last longer than thought,” and that the end of 2022 is “a more likely timeframe for recovery.”
Expanding, on this, Simon Heaney, senior manager of container research at Drewry said, “We had expected more progress at this stage. The deteriorating situation makes us think the problem is much deeper-seated than feared, with the pandemic bringing forward latent crisis within certain sectors.”
Predictions for 2022
As reported in The Load Star, Drewry predicted spot rates to decline next year however they forecast “a significant increase in contract pricing, leading to an increase in average global pricing of about 6%”.
Drewry also upgraded its outlook for average global freight rates, forecasting an annual increase of 126%, which will be a profitability record for ocean carriers. This is despite the increased rates for ships and bunker prices and Drewry expects carriers to make even more in 2022 due to the higher contract rates.
Meanwhile, Maritime Strategies International (MSI) predicted that freight rates are likely to move sideways rather than dramatically downward during 2022 due to the time it will take for the current congestion and backlogs to clear.
Predictions for 2023
Whilst Drewry speculated that ocean freight rates look set to stay elevated well into 2022, with carriers looking to make record profits as disruption continues to restrict capacity, it has cautioned that the flurry of orders for new vessels will alter the dynamic of container shipping’s supply and demand in 2023 and beyond.
As discussed in this article, Drewry pointed out that the volume of orders for newbuild ships in the latter quarter of 2020 was more than three times as high as in the first three quarters of the year. Drewry said it understood that owners would be “scrambling for as many container ships as they can find,” but pointed out that the new orders are unlikely to arrive in time to make a difference.
“These ships are being ordered as if they are for today, not what the market will look like when they are ready for delivery in 2-3 years. Owners are risking paying top dollar for assets that will potentially end the container upcycle.”
In their report, Drewry noted that the current inflation in rates is a consequence of temporary factors such as the demand surge caused by the Covid-19 pandemic and supply chain disruption that reduced port productivity and restricted the market. It warned that “These things will pass and the risk is that when they do the market will be in for a sobering reality check.”
In conclusion, Drewry said that carriers are currently making huge profits and are expected to do so for at least the next couple of years but that the huge rise in ship orders will eventually impact this.
“Ocean carriers look set for a prolonged and unprecedented upcycle, which will enable them to improve their financial health, reward investors and spend more. However, if accelerated ship orders continue, there is a risk of a return to over-capacity that will shorten the cycle.”
How Hawley Logistics Can Help
Despite the current global disruption to logistics and ongoing supply chain issues, Hawley Logistics continue to provide reliable and cost-effective logistics solutions throughout. Our 35 years of experience and extensive networks allow us to seamlessly transport your goods worldwide even in these challenging times.
So regardless of what it is or where it’s going, if you need to get something from A to B, Hawley Logistics can help! Give us a call on 01706 826322 to discuss your needs or use our contact form to get in touch.