Container shipping’s 2022 outlook: The bulls, bears and wild cards

Posted by Francisca Macias
Category:

This year could be even more lucrative for shipping lines than 2021

Never has container shipping begun a year on such a high.

The Shanghai Containerized Freight Index hit a new record in the last week of December, up 76% year on year and topping 5,000 points for the first time. There were 101 container ships waiting for berths in Los Angeles/Long Beach on Sunday, very close to the peak. Trans-Pacific spot rates quoted for this month are higher than in December, which were higher than in November.

Annual contract rates are up sharply in 2022. According to the latest data from Xeneta, Asia-U.S. contract rates are up 122% from 2020, pre-COVID, with bids in early negotiations of 2022 contracts averaging $5,700 per forty-foot equivalent unit.

The overwhelming consensus is this year will remain extremely strong for ocean carriers and extremely expensive for cargo shippers. But there are at least six big “known unknowns”:

How will omicron and future variants impact U.S. consumer demand as well as effective shipping capacity and factory output?
How long will U.S. import demand remain this strong after stimulus is withdrawn?
How much of rate strength is driven by higher import demand and how much is driven by lower effective shipping capacity (given vessels tied up in congestion)?
Can a new West Coast labor contract be signed without disruptions to terminal throughput?
If a labor impasse is averted, import demand falls and congestion eases, will liners have the discipline to remove vessel capacity and keep rates strong, as they did during lockdowns in Q2 2020?
Could China-Taiwan geopolitical tensions devolve into military action?
Bull case
The bullish view on rates is that volumes will continue to be very high this month, prior to the Lunar New Year holiday. Volumes will pick up once again after China resumes work, with U.S. importers seeking to restock depleted inventories during the spring, after which the 2022 peak season will keep rates elevated into Q4 2022.

Proprietary index of ocean bookings bound for U.S. 100 = January 2019. Chart: FreightWaves SONAR
According to Judah Levine, head of research at Freightos, “There is no strong expectation of significant improvements [for cargo shippers] until underlying demand wanes. That doesn’t look like it will be happening anytime soon.”

At the very far end of the bullishness spectrum is the Deutsche Bank team led by U.K.-based analyst Andy Chu. The team’s 2022 estimates of earnings before interest, taxes, depreciation and amortization for Maersk and Hapag-Lloyd are more than twice the consensus average. According to Chu, 2021 was the best year for container shipping on record “but we think that 2022 will be materially better.”

Deutsche Bank predicts the two carriers’ average freight rates will be up 30% this year versus 2021. It forecasts that Maersk’s 2022 EBITDA will be $34.6 billion, up 43% from 2021, and that Hapag-Lloyd’s 2022 EBITDA will be $20.4 billion, up 56% from last year.

Bear case
The bearish view is that freight rates have been propped up by U.S. stimulus — which is now over. Consumer demand will fall, inventories will not be restocked to the extent predicted, and port congestion will clear.

Jason Miller, associate professor of supply chain management at Michigan State University’s Eli Broad College of Business, pointed out that retail sales were “abnormally strong” in 2021. He expects “we still start to see a strong regression towards the long-term trend line [for retail sales] in 2022 with no additional stimulus, student loan deferrals ending … and the likely shift of COVID-19 to an endemic disease.”

Retail inventory-to-sales ratios are historically low, but Miller noted that this ratio was declining pre-COVID and inventories are now far above their historical trend line. Given the uncertain nature of COVID-era demand, he questioned how much retailers would add to inventories this year. “To the extent the answer is ‘we will wait and see,’ this calls into question arguments that retail inventory restocking will be a major source of freight in 2022.”

Ben Nolan, shipping analyst at Stifel, outlined a particularly bearish scenario in which global spot rates fall from $9,300 per FEU (as measured by the Drewry World Container Index) at the end of 2021 all the way to $2,000 per FEU by the end of this year.

Nolan said this scenario is “much more likely in 2023,” but nonetheless possible this year. “We estimate that much of the extreme tightness on container shipping rates can be attributed to supply chain inefficiencies as true underlying demand was just 3% greater than incremental supply,” he said.

“As is the nature with traffic jams, when the accident is removed, normal velocity patterns materialize relatively quickly. It does not currently look like that accident is likely to be moved soon, but when it finally does, we do not expect ‘this time to be different.’”

The “this time it’s different” view is that ocean carriers will counterbalance headwinds — a drop in demand and/or capacity unlocked by clearing congestion — by “blanking” (canceling) sailings to artificially bring capacity in line with demand to prop up rates, a strategy carriers successfully employed at the beginning of the pandemic.

Daniel Richards, associate director at Maritime Strategies International (MSI), wrote in an annual outlook published by TradeWinds: “If, ultimately, markets do not fall meaningfully once it becomes implausible to blame congestion and Covid-19 … we will readily attribute greater weight to a changed industry structure, as likely will regulators [but] … it is still too soon to tell if the industry is permanently transformed.”

Wild cards
The big wild cards for 2022: COVID, port labour negotiations and the Taiwan “gray swan.”

COVID — As this year began, essential services in places like New York City — as well as air service nationwide — were being curtailed by a large number of workers out sick or testing positive, as the omicron variant rapidly spread.

If the same pattern emerges for longshoremen and other workers essential to supply chains, congestion could worsen.

Meanwhile, China continues to pursue a “zero-COVID” policy in which large population centers are locked down for a small number of cases. The city of Xi’an, with a population of 13 million, has been in a strict lockdown since Dec. 22 due to cases of the delta variant. Delta cases have also just been reported in the city of Ningbo, the site of a major port. Yet another outbreak is affecting Yangtze River pilot operations.

If the much more transmissible omicron variant takes hold in China and the country sticks to its zero-COVID policy, it would lead to widespread factory closures, as seen after the initial Wuhan outbreak, and port closures, as seen in Yantian and Ningbo last year.

Port labor contract — The International Longshore and Warehouse Union contract with West Coast terminals expires on July 1. The previous round of negotiations, in 2014-15, did not go smoothly. Disruptions to terminal operations led to backlogs in Q1 2015 similar to levels in the early part of this year.

Taiwan — The other big wild card for container shipping, given America’s exceptionally high dependence on Chinese exports, is the geopolitical tensions over Taiwan. On Thursday, Wang Ming, China’s foreign minister, warned that America’s encouragement of “Taiwan’s independence forces … not only puts Taiwan into an extremely dangerous situation but also exposes the United States to an unbearable price.”

According to Nolan of Stifel, “I hate to even open the door to this Pandora’s box, but clearly the Chinese have coveted the island of Taiwan for years and tension has been rising. Any overt military action on the part of the Chinese would be very bad for all things shipping, as it would likely lead to sanctions and a reduction of the flow of goods. We certainly hope things do not escalate in the Formosa Strait, but it would not be a complete black swan event at this point.”

Source:freightwaves.com/news/

Comments

  • Can I just say what a comfort to find somebody who really knows what theyre talking about on the web. You definitely understand how to bring an issue to light and make it important. More people have to read this and understand this side of your story. I was surprised that you arent more popular because you surely possess the gift.

  • Последние выпуски передач и новые серии любимых сериалов!.
    Вот смотреть онлайн в хорошем качестве бесплатно фильмы.
    Смотреть онлайн фильм бесплатно.

  • When I initially commented I seem to have clicked on the -Notify me when new comments are added- checkbox and now every time a comment is added I receive 4 emails with the exact same comment. Is there a means you are able to remove me from that service? Cheers!

  • Itís difficult to find educated people about this subject, but you sound like you know what youíre talking about! Thanks

  • An intriguing discussion is definitely worth comment. I do believe that you need to write more on this subject matter, it might not be a taboo matter but usually people dont speak about such issues. To the next! Best wishes!!

  • Hi there, I enjoy reading all of your post. I like
    to write a little comment to support you.

  • כמובן, שאם אתם מזמינים את השירות בעקבות איזו פנטזיה שאתם מאוד רוצים לממש, כדאי שתיקחו גם את הנושא הזה בחשבון, מכיוון, שלא כל נערת
    ליווי תהיה ערוכה לממש את הפנטזיות שלכם.

    השירות ניתן במגוון דירות דיסקרטיות
    איכותיות וחדרים לפי שעה בכל רחבי הארץ, אך ניתן להזמין אותו גם
    לבית הפרטי. אם אתה גר לבד אז אין בעיה, אתה יכול
    להזמין אליך את מי שאתה רוצה ומתי
    שאתה רוצה, אלא אם כן אתה מעוניין להוסיף קצת ריגוש לחיים או לחלופין,
    לשמור על הפרטיות שלך. אתה
    יכול להזמין זונות עד בית מלון לדייט או כל מיני עגילים תאריכים יחידים מה
    אתה חושב על זה, ומה הדרך
    החדשה? מסיבות איבים ומסיבות שלחו עותק
    של חוברת זו ושלחו לתיבת הדואר שבדף זה, ולא תוכלו לשלוח אותה!

    בדיוק בגלל זה, חשוב לדעת בכלל איך מחפשים עיסוי ארוטי בכפר סבא, ומסתבר שזה משהו שהרבה מאד אנשים בכלל לא
    מכירים. ישנם אנשים שמקבלים עיסויים
    למטרות פינוק וכייף בביתם ולפעמים מגיעים לדירה דיסקרטית ברמת-גן אך גם ישנם אנשים המבקשים לעבור עיסוי במרכז בעקבות כאב מסוים.
    בפועל, תוכלו להגיע אל מכון עיסויים במטרה לקבל עיסוי בלבד, או לחילופין יוכל המעסה להגיע אליכם עד פתח הבית או
    אתם יכולים להגיע אליו לדירה דיסקרטית
    בתל אביב. יותר מזה אפילו, בכל
    אזור תוכלו אפילו לצפות במגוון
    רחב של תמונות אמיתיות של שירותי ליווי
    באיזורכם כדי להימנע מאכזבות.

  • Appreciate the recommendation. Will try it out.

  • אנו מציעים שירותי עיסוי בדירות דיסדקרטיות במגוון טכניקות.
    מי שגר במישור החוף הדרומי ורוצה להזמין שירותי ליווי ברחובות לעיסוי
    מפנק יכול לעשות זאת בדירות דיסקרטיות.

    אז נכון שהטיפול מפנק ואפשר בהחלט לבוא באופן חד פעמי לשעה ולתת לגוף ולנפש מנוחה,
    אבל תורה עתיקה זו היא הרבה מעבר לכך.
    לסיכום, בילוי עם נערות ליווי הוא בהחלט דבר מומלץ.

    קמילה לביתך או מלון בחיפה והצפוןנערת ליווי לביתך מלון
    לבילוי מפנק… מכוני עיסוי מפנק
    ברחובות. דירות דיסקרטיות ברחובות משמשות את עובדי המרכז הרפואי
    קפלן ואת נציגי מפעלי התעשייה.
    הן גם אטרקטיביות עבור עובדי פארק תעשיית ההיי טק,
    מחלבת תנובה וכמובן מכון ויצמן.
    באתר תוכלו למצוא דירות דיסקרטיות
    בצפון, במרכז, בדרום ובאיזור ירושלים וכמובן גם לחסוך בהוצאות.
    התרשמו ממגוון הצעות האירוח באתר ותוכלו להגיע עוד
    היום לדירה דיסקרטית מאובזרת ומפנקת.
    ט.ל.ח – יש לקחת את המחירים שבטבלה בערבון
    מוגבל ואין לראות בה כתחליף לקבלת הצעות מחיר מקליניקות פדיקור רפואי.
    דרך האתר תוכלו להשוות בין המחירים של דירות דיסקרטיות
    בטבריה, צימרים בכנרת וחדרים בבית מלון.

  • Excellent post! We will be linking to this great content on our site.
    Keep up the good writing.

  • I like the helpful information you provide in your articles.
    I’ll bookmark your blog and check again here regularly.
    I am quite certain I will learn plenty of new stuff right here!
    Good luck for the next!

  • I’m really loving the theme/design of your web site. Do you ever run into any browser compatibility issues?
    A number of my blog readers have complained about my blog not working correctly in Explorer but looks great in Chrome.

    Do you have any advice to help fix this problem?

  • Hello, Neat post. There is an issue along with your web site in web explorer, could
    test this? IE nonetheless is the market chief and a large component to folks will leave
    out your great writing because of this problem.

  • What kind of slots are at kentucky downs, crypto gambling casinos in nevada – caesars windsor craps odds.

  • If you want to obtain a great deal from this piece of writing then you have to apply such
    methods to your won webpage.

  • Hello there I am so delighted I found your weblog, I really found you by mistake, while I was looking on Aol for something else, Regardless I am here now and would
    just like to say thank you for a marvelous post and a all round enjoyable blog (I also love the theme/design), I don’t have
    time to read through it all at the moment but I have book-marked it
    and also included your RSS feeds, so when I have time I will be back to
    read a great deal more, Please do keep up the awesome jo.

  • Hey outstanding blog! Does running a blog such as this require
    a great deal of work? I’ve very little knowledge of programming but I was hoping to start my own blog in the near future.
    Anyways, should you have any ideas or tips for
    new blog owners please share. I understand this is off topic however
    I simply had to ask. Many thanks!

  • I’m really impressed with your writing skills
    as well as with the layout on your weblog. Is this a paid
    theme or did you customize it yourself? Either way keep up the excellent quality writing, it’s
    rare to see a nice blog like this one these days.

  • This article is really a nice one it assists new net people,
    who are wishing in favor of blogging.

  • Thank you for the auspicious writeup. It in fact was a leisure account it.
    Look advanced to far delivered agreeable from you! By the
    way, how can we keep up a correspondence?

  • I am extremely impressed together with your writing abilities as well as with
    the layout in your weblog. Is this a paid topic or did you customize it your self?
    Either way stay up the excellent quality writing, it is rare to peer a great weblog like
    this one today..

  • I’m gone to convey my little brother, that he should also
    go to see this webpage on regular basis to obtain updated from newest gossip.

  • I must thank you for the efforts you’ve put in writing this blog.
    I really hope to view the same high-grade content from you later on as well.
    In truth, your creative writing abilities has motivated me to get my own, personal site now 😉

  • I’ve been browsing online more than 3 hours today, yet I never found any interesting
    article like yours. It is pretty worth enough for me.
    Personally, if all web owners and bloggers made good content as you did,
    the web will be much more useful than ever before.

  • Hey there I am so glad I found your site, I really found you by accident,
    while I was researching on Google for something else, Nonetheless I am here now and
    would just like to say thanks a lot for a incredible post and
    a all round interesting blog (I also love the theme/design),
    I don’t have time to read through it all at the minute but I
    have bookmarked it and also added in your RSS feeds, so when I have time I will be
    back to read a lot more, Please do keep up the awesome work.

  • Free online slots games no downloads no registration, poker tables for hire – free real life slots.

  • Next christmas vip slots, numbers to 1000 bingo – blackjack strategy to win.

  • Guaranteed roulette winning system, 13 card poker online – what is the online casino giving out 120 free spins.

  • I was able to find good information from your blog posts.

  • What’s up, everything is going perfectly here and ofcourse every one is sharing facts,
    that’s actually excellent, keep up writing.

  • Please let me know if you’re looking for a author for your blog.

    You have some really good articles and I think I would be a
    good asset. If you ever want to take some of the
    load off, I’d really like to write some articles for your blog in exchange for a link back to mine.
    Please shoot me an email if interested. Kudos!

  • Hi to all, how is all, I think every one is getting more from this site, and your views are good in support of new
    visitors.

  • I just could not leave your site before suggesting that I extremely enjoyed the
    standard information an individual supply for your guests?
    Is going to be back frequently to check up on new posts

  • Wonderful blog! I found it while searching on Yahoo News.
    Do you have any suggestions on how to get listed in Yahoo News?
    I’ve been trying for a while but I never seem to get there!
    Cheers

  • Hi there to every one, it’s in fact a fastidious for me to visit this web page,
    it consists of helpful Information.

  • Hi there would you mind letting me know which web host you’re working with?
    I’ve loaded your blog in 3 completely different web browsers and I must say this
    blog loads a lot quicker then most. Can you suggest a good web hosting provider at a reasonable price?
    Thanks a lot, I appreciate it!

  • Awesome post.

  • At this moment I am ready to do my breakfast, later than having my breakfast
    coming yet again to read more news.

  • Thanks , I have recently been searching for info about this topic for ages and yours is the
    best I’ve discovered so far. However, what concerning the bottom line?
    Are you certain in regards to the source?

  • Inspiring story there. What occurred after? Thanks!

  • What’s up mates, pleasant piece of writing and good urging commented here,
    I am really enjoying by these.

  • Today, I went to the beachfront with my kids. I found
    a sea shell and gave it to my 4 year old daughter and said «You can hear the ocean if you put this to your ear.» She put the shell to
    her ear and screamed. There was a hermit crab inside and it pinched
    her ear. She never wants to go back! LoL I know
    this is totally off topic but I had to tell someone!

  • Wonderful beat ! I wish to apprentice even as you amend your website,
    how could i subscribe for a blog site? The account aided me a appropriate deal.
    I have been tiny bit familiar of this your broadcast offered bright clear idea

  • Hi mates, how is all, and what you would like to say regarding this paragraph, in my view its genuinely amazing in favor
    of me.

  • Wow, this article is good, my sister is analyzing such things, therefore I am going to inform her.

  • Hi there! This is my first comment here so I just wanted to give a quick shout out and
    tell you I really enjoy reading your blog posts.
    Can you recommend any other blogs/websites/forums that cover the same
    topics? Appreciate it!

  • Видео: Комедия, Россия, 2022. Кино смотреть онлайн в хорошем качестве бесплатно фильмы.
    Фильм смотреть онлайн бесплатно.

  • Клиническая психология Психологическое Консультирование

  • Психолингвистика Процессуальная
    Терапия

  • Психология управления Психологическое Консультирование

  • Психология восприятия Психология Личности

  • Смотрите Фильм онлайн и бесплатно в HD качестве..
    Кино Дом Дракона 2 сезон 1 серия.
    Смотри ТНТ фильмы онлайн смотреть онлайн.

  • Фильмы 2022 смотреть онлайн в хорошем качестве..

    Кино Фильмы 2022 годад.
    Сериалы, фильмы Видео – Буду смотреть.

  • Сериалы, фильмы Видео – Буду смотреть..
    Вот фильм онлайн в хорошем качестве.

    Смотреть бесплано онлайн ГидОнлайн

  • What’s up to every body, it’s my first visit of this weblog; this
    weblog includes amazing and genuinely excellent material in favor of readers.

  • Hey there would you mind letting me know which webhost you’re using?

    I’ve loaded your blog in 3 completely different internet browsers and I must say this
    blog loads a lot faster then most. Can you suggest a good internet hosting provider at a honest price?
    Thanks, I appreciate it!

  • I really like it whenever people come together and share opinions.
    Great website, continue the good work!

  • Смотреть фильмы онлайн — Теги видео.
    Вот Онлайн фильмы.
    Фильмы, Смотреть Онлайн.

  • Фильм. Развернуть описание. Оригинальное названи..
    Здесь Онлайн фильмы.
    Смотреть фильмы онлайн бесплатно в хорошем качестве

  • Все фильмы, статусы, отзывы и оценки пользователя..
    Доступ Онлайн фильмы.
    Страницы сериалов и фильмов.

    Видео: Анимационный, Комедия

  • Список всех старых фильмов, фильмография..

    Доступ Онлайн фильмы.
    Сериалы, фильмы Видео – Буду смотреть.

  • I’m excited to discover this site. I wanted to thank you for your time for this fantastic read!!

    I definitely loved every bit of it and I have you book marked to look at new information on your site.

  • There is certainly a lot to know about this topic.
    I love all the points you’ve made.

  • 123movies downloader 123freemovies

  • Dragon heat slots, why not try these out – mini mobile casino.

  • No deposit free spins dreams casino, click over here – bovada poker ipad app.

  • It’s awesome to pay a visit this web page and reading the views of
    all mates concerning this piece of writing,
    while I am also eager of getting familiarity.

  • We stumbled over here different web address and thought I may
    as well check things out. I like what I see so now i am following you.
    Look forward to looking over your web page repeatedly.

  • Amazing! This blog looks exactly like my old one! It’s on a entirely different
    topic but it has pretty much the same layout and design. Excellent choice of colors!

  • Ojo casino bonus codes, browse around this website – buy slot machines for home.

  • Slots era apk mod, that guy – lakeside casino iowa.

  • Download hot slots 2, read full report – free cs gambling sites.

  • Online aussie slots, simply click the next internet page – casino niagara new york.

  • Planet slots, please click the up coming website page – ruby slots casino no deposit codes.

  • Hay day rss slots, similar site – how to get a slot machine out of a cell phone.

  • Runescape gambling website, mouse click the up coming article – house of fun slot machines free coins 2022.

  • Casino gambling online review search, just click the up coming article – no deposit bonus live casino.

  • more Link

  • I’m no longer certain where you are getting your info, however great topic.
    I needs to spend some time finding out much more or understanding more.
    Thanks for magnificent info I was on the lookout for this info for my mission.

  • Great info. Lucky me I came across your site by accident (stumbleupon).
    I have book-marked it for later!

  • Hi, after reading this amazing piece of writing i am too cheerful to share my know-how here with colleagues.

  • url Link

  • url Url

  • link
    More

  • Way cool! Some extremely valid points! I appreciate you penning this post and also the rest of the website is also very good.

  • Greetings! Very useful advice in this particular post!
    It is the little changes that will make the biggest changes.
    Thanks for sharing!

  • Hi every one, here every one is sharing these kinds of knowledge,
    so it’s nice to read this web site, and I used to pay a visit this weblog
    all the time.

  • Your style is very unique in comparison to other people I’ve read
    stuff from. Thank you for posting when you’ve got the opportunity, Guess I will just bookmark this site.

Deja una respuesta