Shipping capacity crunch hindering global economic recovery

 

A ‘maxed-out’ container shipping industry is setting limits on what international trade can contribute to post-Pandemic recovery. The shortage of vessels and equipment in global container shipping markets is hindering the pace of economic recovery in countries emerging from pandemic restrictions, says the latest Container Shipping Market Quarterly Review issued by the Global Shippers Forum and MDS Transmodal consultancy.

The Review reports on eight performance indicators of the global container shipping market using publicly available data for the first quarter of 2021. These data are unaffected by the closure of the Suez Canal on 23 March for six days, but the effects of this on trade and shipping in the second Quarter of this year will be captured in the next Review to be issued on 1 August 2021.

Commenting on the findings, James Hookham, Secretary General of Global Shippers Forum, said: “Shippers around the world are in a state of shock at the collapse of service performance and the remorseless rise in shipping rates. The latest data confirms the anecdotal experiences of shippers struggling to book container slots on a fleet that has hardly grown and needing to absorb the relentless rise in rates that is eroding their own profit margins.

 “What the data don’t show is the cargo left behind on the dock. The fact that industrial output continued to rise over the first three months of the year, but the number of containers carried actually fell slightly shows this is an industry that has ‘maxed out’. This is already causing shortages of products and materials essential to the recovery of economies after the traumas of the Coronavirus pandemic.

“Shipping lines continue to pump up their prices with further General Rate Increases announced in most trades by most carriers. These are blamed on shippers bidding up prices to secure slots and equipment. Let’s be clear the reason shipping rates are going up is because shipping lines keep increasing them. If shippers were responsible, then the market would have found its own level. 

“World governments urgently need to realise that the prospects of a rapid economic recovery are dependent on a resumption of international trade at predictable costs and levels of service. Right now, the double whammy of inflation pressures and chronic shortages of essential products could disrupt the hoped-for resumption of business as normal.”

 Mike Garratt, Chairman of MDS Transmodal, said: “Supply and demand conditions in Q1 2021 were similar to Q4 2020 in that while demand fell by 1% and scheduled deployment of global shipping capacity grew by 2% a continuing decline in service reliability and port calls probably cancelled out any marginal benefit to that balance. Mean freight rates have continued to accelerate; gross freight revenues per TEU have grown by around 40% while spot rates have grown even faster.” (Photo Shutterstock)

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