Container shipping companies are investing in new capacity, but rates are likely to remain elevated amid the global shortage that has seen average container costs rise by three or four times, especially for material from Asia to Latin America, for Adam Yanelli for ICIS.
Freight rates on the rise
On Friday, German container ship owner Hapag-Lloyd announced that it has ordered 60,000 TEU (twenty-foot equivalent unit) of shipping containers in May on top of the 150,000 TEUs it ordered in April.
Global shipping major AP Moller-Maersk said during an earnings conference call in May that it has increased its capital expenditure (capex) budget for 2021-2022 to $7bn from $4.5-5.5bn, with some of that to be spent on additional containers.
But other issues, such as congestion at ports, sailing delays, capacity imbalances (especially from Asia) and delays in inland transports, combined with continued strong demand for imports in the Americas are likely to keep container freight rates elevated.
Need for more containers
The current dynamics have led to containers being tied up for longer periods of time, which means shipping companies need more containers to transport the same volume at the same rate of sailings.
- Hapag-Lloyd said that the first containers from the new order should be close to being delivered and integrated into its existing container fleet in early July. The majority will be delivered in the third quarter.
- Maersk executives said in May that containers can typically be ordered and received within the same quarter.
Soaring container rates
Shipping container rates remain near all-time highs, although some market participants have seen them come down a bit.
An importer on the west coast of South America said it was quoted $8,900 for a 20-foot dry container with about 36 days transit time from Shanghai to Brazil.
Market players have said container rates have historically been around $2,000 per container. This is down slightly from earlier this year when some in the market saw container prices as high as $10,000.
Congested ports, Trucking and Rail woes
Demand for imported goods rose during the pandemic, as US consumers stopped spending on travel and leisure amid efforts to help stop the spread of the coronavirus pandemic and instead bought goods.
As the US and other economies began to reopen following lockdowns, the demand continued to grow. A winter storm that shut down a lot of chemical production in the US Gulf for a period of time added to the supply chain constraints and shipping delays.
Even before the shipping issues arose, the US was already dealing with a shortage of truck drivers and dealing with increased delays from rail providers.
Railroads have seen some improvement. But the shortage of truck drivers has gotten worse as most driver schools were forced to close in 2020 because of the pandemic.
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Source: ICIS
