- The world’s largest container carrier said trade disruptions that have sent freight rates soaring and overwhelmed major ports may start to ease after the first quarter.
- It is disappointing for investors but signaling eventual relief for cargo shippers.
- New containers coming into service, industry observers expect those volatile spot rates to stabilize and bottlenecks ease by the end of the first half.
A recent news article written by Christian Wienberg, Kyunghee Park and Morten Buttler, and published in the Bloomberg Quint reveals that global shipping turmoil is expected to calm down by mid-year.
Continuous impact of the Covid-19 pandemic
A.P. Moller-Maersk A/S Chief Executive Officer Soren Skou said the fourth quarter “was marked on the one hand by a continuous impact of the Covid-19 pandemic but also by some rewarding progress on our strategy to become the integrator of container logistics.”
Looking ahead, Maersk said it expects “the current exceptional situation” of surging demand, supply chain bottlenecks and equipment shortages to continue this quarter “and normalize thereafter.”
Higher rates have helped
For now, though, higher rates have helped to boost earnings at some shipping companies, many of which posted losses in previous years because overcapacity.
The ocean liners may also benefit in the months ahead from the higher rates they’re negotiating in fixed contracts, Skou said.
“There is no doubt that contract rates are rising,” though at varying degrees depending on the route, he said. “We have renewed 40% of our contract portfolio and we are seeing sharply rising rates.”
What Maersk says?
Maersk said it expects profit to grow as much 27% this year. HMM, South Korea’s biggest shipping line, reported its first annual operating profit in 10 years in 2020.
The shipping industry could still face challenges over the next three to four months, but “hopefully in the summer, we can get back to what we call a steady operation and get our ships back on schedule and get our customers handled much more efficiently,” Nixon said.
Spot container rates
Spot container rates on key trade lanes jumped to records last month.
The cost from Shanghai to Los Angeles rose to a record $4,194 per 40-foot container on Jan. 7, while those from the Asian hub to Rotterdam surged to $9,066 on Jan. 21, according to the Drewry World Container Index.
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Source: Bloomberg Quint
