Container shipping remains under pressure

Container freight rates have fallen -32% this year. A spectacular fall? This is good, but the rates are still well above the pre-pandemic average. 2021 brought record profits and the expected results for 2022 and 2023 look more than good. However, the sector still remains under pressure. Our research department has analysed the most important challenges.

Before the coronavirus crisis, a forty-foot box cost $1,450 average freight rate. In September 2021, this rate was $10,377. Although freight rates have shown a steady decline since then, they are still well above pre-crisis levels. Today, it costs $6,400 average and we expect it will cost $4,550 average in 2023.

High freight rates drive up inflation

The IMF and central banks are watching developments in container shipping with suspicion. Inflation is skyrocketing all over the world. Sellers who pass on higher transport costs to their customers cause further price increases. It is also a threat to container shipping itself. Inflation will change buying behaviours that will also affect the flow of goods. This makes the future of container shipping companies extremely uncertain.

The main reasons for the high freight rates of container shipping are higher fuel, container and ship prices, late delivery of new ships, and constant congestion at port handling due to shortage of truck drivers.

Record years

After nearly doubling its revenue in 2021, the global container shipping sector is heading for another record year. Based on a sample of 30 global shipping companies, our experts estimate a revenue growth of +70% in 2021, which represents an average of $11 billion per company. The average net profit came to $3.5 billion per company. That is particularly high for a sector that barely reached breakeven in the past five years.

2022 will also be a record year for container shipping companies. And the perspectives for 2023 are also good. Anyone who thinks this success will lead to a substantial increase in container carrying capacity will be disappointed. Our experts predict that the market will still be tight with associated supply problems.

Container ships experience major delays

Container shipping companies have taken full advantage of the massive catch-up demand that has emerged after the reopening of global markets. At the same time, container transport has also been disrupted due to a shortage of containers, the coronavirus in Chinese ports, delays in US ports and lack of dockers in ports from a lack of truck drivers. In many seaports around the world, congestion has been developed. As a result, in 2021 only a quarter of container ships docked and left as planned. This percentage has now improved slightly but is still not 50%. Due to all the delays, a lot of the capacity in the container market is not available.

Limited fleet expansion

Significant investments have been made by container shipping companies (in 2021: +61%). However, the capacity increases less than expected. And this for many reasons. First, the price of container ships has risen sharply (doubled last year). Deliveries of new ships are delayed. These new ships do not really flesh out the fleet as some of the older ships have to be decommissioned as they no longer meet today's standards.