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Black swan events keep container lines shipshape


THIS was supposed to be the year that the chickens came home to roost for shipowners, chuckled London's Investors' Chronicle.

"After spending large chunks of the excess profits made when shipping rates soared during the pandemic on new ships, the forecasts a year ago were for freight rates (and shipowners' earnings) to crash as huge new vessels came into service," said the journal.

Although the latter has happened, with container lines expanding their existing fleet at a rate of one per cent per month in the first eight months of this year, a wave of disruptions has pushed rates higher, according to Simon Heaney, senior manager of container research at consultancy Drewry.Shippers have had to contend with the effective closure of transshipments through the Red Sea, the ongoing threat of strikes by dock workers in North America, and more recently typhoons disrupting shipping in Taiwan and China."Black swan events seem to be occurring at a frequency that makes a mockery of the definition," said Mr Heaney, referring to unpredictable events. The Freightos Baltic Index, the global average spot rate for shipping FEUs, has more than doubled over the past 12 months, to US$3,612. This compares with a peak of over $11,000 three years ago. Alongside the recent route disruption, demand has been stronger. After two years of sub-one per cent growth, global port throughput increased by six per cent in the first half of this year, although it fell by 13 per cent in the Middle East as attacks on ships in the Red Sea meant most container line operators avoided the Suez Canal and re-routed ships around Africa. The longer journey times helped to mop up the excess capacity.

However, the growth in supply is continuing to outstrip demand, with Trine Nielsen of data provider Flexport stating that the global fleet capacity will expand by a further eight per cent next year, while demand growth is set to slow to around three per cent. Yet if the container lines have any concerns about overcapacity, "they're doing a very good job of concealing them", Mr Heaney said. Contracts for more than 100 new container ships were signed during the third quarter, equivalent to an increase in capacity of 1.4 million TEU.This was the second-busiest quarter on record and followed an "extraordinarily busy" second quarter when 1.2 million TEU of new capacity was agreed, Mr Heaney said.

This could potentially be storing up problems for the future. If, for example, the Suez Canal route was once again deemed safe enough to transit, this would free up an additional 10 per cent of capacity. Although this could take months to rebuild, it would immediately push rates down by around 25 per cent, said Drewry's head of supply chain advisers, Philip Damas.

 

 

 

 

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