Global container shipping rates high but unsustainable: Fitch

LONDON: Global container shipping corporations’ efficiency can be robust in 2021 after a worthwhile 2020, in response to Fitch Ratings.

Spot freight rates will stay high within the quick time period which can circulate via to contracted rates for 2021. However, Fitch stated the present rates are unsustainable within the medium time period because the sector is prone to fee volatility and dangers of weak financial restoration and commerce protectionism, requiring fixed prudent capability administration.

A mix of rebounding demand for items in 2H 2020, provide chain disruptions — like container field shortages and port congestion — and extra strategic capability administration drove container freight rates up, particularly on the routes from China to Europe and the United States.

Shipping one 40-foot container from China to Europe or the US West Coast now prices over 8,000 {dollars} and 4,000 {dollars} respectively from nicely under 2,000 {dollars} a 12 months in the past.

Trade quantity restoration was fuelled by a change in shopper spending habits throughout the pandemic — ordering extra manufactured items whereas saving by spending much less on companies like leisure and eating places. It was additional supported by stock re-stocking by companies that confronted acute provide chain disruptions and elevated demand for private protecting gear.

Total volumes shipped from Asia to North America exceeded 2019 ranges by over 7 per cent in 2020. A decline in volumes on the Asia Europe route by about 5 per cent in 2020 signifies a development potential in 2021 as demand recovers.

Container field shortages and port congestions attributable to pandemic-related operational disruptions have prolonged container ships’ turnaround occasions, additional rising freight rates. A normally quiet interval throughout the Chinese New Year may have eased some congestion but demand remained robust as China maintained its manufacturing ranges.

Fitch stated the continued virus outbreaks in lots of areas and mobility restrictions are more likely to hold freight rates abnormally high within the quick time period. These higher-than-usual spot rates will translate into larger contract freight rates within the ongoing spring contracting season.

“However, we view rate volatility as an inherent sector risk and we expect rates to reduce once supply disruptions related to the pandemic are addressed.”

Although container shipping corporations carried out strongly throughout the pandemic, Fitch stated the present shipping rates are unsustainable and count on them to reasonable within the medium time period as soon as provide chain disruptions ease because the business is extremely aggressive.

The sector stays topic to dangers of geopolitical tensions and commerce protectionism, uncertainty about financial restoration paths in numerous areas, in addition to ESG-driven initiatives like IMO 2020 and different emission rules.