While unnormal seems to have become the new normal for everyone involved in the transportation and logistics industry, there is full steam on the quest to find the elusive answer to what 2022 and beyond will bring.
No signs of pre-COVID 19 rates in the foreseeable future
Airfreight continues to act somewhat in accordance with historic development. Q4 is marking the traditional peak season, and it has triggered rate increases throughout the quarter. It is our opinion that these increases are primarily owed to peak volumes and less related to other factors such as COVID-19 impact. However, ground handling congestion is a serious concern causing significant delays, which can largely be contributed to a lack of labor due to COVID-19.
Ocean freight remains the big-ticket item and talk of the town. On the back of eye-watering financial results, all carriers remain adamant that a return to a market situation resembling pre-COVID-19 is not on the cards, neither short/mid-term nor long term. In any case, hoping for more merciful rate levels would hinge on the ever-present option of further blank sailings not being introduced at a large scale.
The macro-economic, port congestion, and peak season cocktail
Looking at the macro-economic indicators, the growth in global GDP has remained strong throughout the last months. We are, however, seeing the first signs of a slow-down as a natural result of record-high inflation levels, as well as the year-long consumer spending spree aided by governmental stimulus packages slowly coming to an end.
With continued global port congestion triggered by lack of labor in most ports in the western world, and additional vessel capacity not being added until 2023, there are though only little signs that this will trigger a dramatic shift in the supply and demand situation. In plain terms, whatever economic slow-down comes in the short-mid-term, it will be leveled out by many other factors that continue to plague the shipping industry.
Development in short-term rates on the Far East to Europe and Far East to the US has shown a moderate decrease during the last weeks. We assess that this reflects the traditional slack season on Asia exports. The overall consensus from analysts is that the rate peak has been reached, which, in turn, triggers immediate speculation on where the “new normal plateau” is.
Christmas sales under threat
The chaos across trades incl. record-low schedule reliability has severe consequences for supply chains around the world and is officially a full-blown “supply and delivery” crisis. Global retailers, most recently IKEA, have informed that not all products will be available for the foreseeable future. Many other retailers are in the same situation, not being able to promise that all products will be on the shelves for the Christmas season. In the Automotive industry, the shortage of micro-chips has already halted production at many factory sites. While this as much is owed to a manufacturing crisis, it again shows the delicacy of the supply chain ecosystem.
2022 contract negotiations will show the direction
Short-term rate development aside, there is though one usual strong indicator for what we can expect in the coming year(s) regarding the 2022 contract negotiations for long-term rates. Writing this update, 2022 contract negotiations have slowly but surely kicked off, and we will offer our best take on what to expect in this market advisory.
As always, we wish to emphasize that we remain confident in finding solutions to the challenges we jointly face. There is no one-size-fits-all solution, and the market overall remains very volatile. However, the pro-active and constructive dialogue we experience every day with you makes a true difference in finding the optimal solutions.
Note that all information is given to the best of our knowledge and is prone to change.