Soaring container shipping prices are expected to reach their limits during the summer. But everything suggests that freight rates will stabilize at high levels.
Here are the lessons to take from the first semester:
1 / The market tension is self-sustaining
Blank sailings, shortage of equipment, port congestions: little by little, generalized chaos is settling in the markets to become a new norm.
The notion of price is totally uncorrelated from the associated service, and the inflationary spiral on freight rates is spiraling out of control.
2 / The modal shift is accelerating but cannot meet all of the demand
The Railway Silk Roads are gaining momentum but only represent a small capacity per year. So this is a marginal solution that has shown its relevance, but it is not yet a "game-changer".
3 / Exponential Western demand keeps the bubble swelling
To use a buzzword, the "resilience" of American and European consumers is astonishing, in the current pandemic context.
While manufacturing to order becomes generalized, the increase in prices and especially the extension of delivery times to 2 or even 3 months do not seem to discourage demand from end consumers who continue to pay cash on order.
This trend is a novelty, undoubtedly encouraged by the development of e-commerce, which today completely and permanently disrupts purchasing behavior.
4 / The massive and rapid near-shoring did not take place
Even before the Covid-19 pandemic broke out, Western Supply Chain departments began to question the diversification of sourcing and near-shoring, to avoid too much dependence on China.
The pandemic could have given a boost to this movement. But it is clear that it has not.
China remains "the factory of the world", even though alternative sourcing is developing at the margins.
Despite the constant increase in the cost of raw materials, China remains unbeatable to this day on the prices for the majority of the consumed products.
5 / The post-Covid period is not yet insight
The prospect of a rapid return to the "world before" is receding, with new variants and the alternation of deconfinement / reconfinement / lockdowns and lockdowns liftings. Without a global planetary approach, and not by area or by hemisphere, it now appears impossible to overcome the pandemic. Economic players must deal with this uncertainty.
What to expect for the second semester?
Three possible scenarios for the evolution of containerized maritime transport:
1 / The inversion of the balance of power
This scenario is moving away, at least in the very short term. On one hand, because of the massive injection of liquidity into Western consumption to contain any social explosion, and on the other hand, due to the lack of alternative options.
The effects of the FAK rate announcement of $ 20,000 on the 40 ’between Asia and Europe from July 1st is a life-size" stress test "for our economies.
At best, the trend is indicative of momentary overheating. At worst, it announces a risk of a rapid slide into a much more serious situation, hyper-inflation leading to the infernal triptych of rising credit rates, rising public and private debts, and the erosion of the power of purchase.
This economically dark scenario must be taken seriously. This remains unlikely, but the risk is not zero in a context of political tension with China and a global pandemic still far from being under control.
2 / Shipping companies keep control
This is now the most likely scenario for the second half of the year.
Shipping companies are the first to know this, and the call for relative wisdom is gaining ground. The challenge now is to land the market smoothly but at high levels, i.e. 5-digit FAK rates by 40 ’on major trades.
The port congestion in the Greater Shenzhen area has not been fully resolved and the container shortage in southern China remains a fundamental problem.
3 / Political regulation
So far, the trade policies of shipping companies are not scrutinized too closely by regulatory authorities. Overall, this third scenario therefore lost its credit during the first half of the year.