Lengthy delays and high freight rates in container shipping will not subside until at least 2023, according to a revised forecast by the Drewry consultancy, citing the impact of the Russian invasion of Ukraine and a new Covid-19 wave in China.
Simon Heaney, Drewry’s senior manager of container research said that carriers’ ability to charge customers extremely high freight rates is dictated by the duration of supply chain bottlenecks, which remain highly unpredictable.
The Drewry report downgrades the outlook for global port handling as well as predicting continued increases in freight rates and carrier profits.
“We have to say that Covid-19 has been exceptionally good for carrier profitability,” Mr. Heaney said. “From a logistics perspective, the primary side effect has been to create capacity shortages in virtually every link of the freight transportation network at a time of very high demand.
“Any new factory shutdowns or slowdowns in China spell bad news for carriers, as it will forcibly choke off demand for their services, potentially inadvertently correcting some of the capacity shortage problems that we’ve been experiencing for the last couple of years. The sweet spot for carriers is for logistics congestion to be bad, but not so bad that it interrupts the flow of goods out of the factory gates.”
The report warned a prolonged war in Ukraine will slow down global economic growth, reduce container demand and hinder container supply chain recovery.
Moreover, China’s zero-Covid strategy could aggravate container deadlocks, reducing logistics capacity and consequently causing a decline in manufacturing and container shipments. (Dreamstime photo)