Spiralling shipping costs threaten survival of small businesses

10:07pm 23rd September 2021





Shippers are facing a “meltdown of the container shipping market” as they enter the peak season, according to the latest Container Shipping Market Review from the Global Shippers’ Forum and MDS Transmodal.

With deployed capacity failing to keep pace with growing consumer and business demand, a “rapidly disintegrating” box shipping market was pushing up shipping rates beyond the reach of many small and medium sized businesses.

“Global levels of container traffic grew again in the second quarter to reach record levels but have still not yet quite recovered to the level that trends implied three years ago, when lines reduced their level of newbuildings,” said MDST chairman Mike Garratt.

He added that the capacity shares based on vessel sharing agreements or consortia in some key markets now exceed 40%.

“This high level of consolidation has the benefit of enabling lines to adjust capacity allocation in line with changing demand but, combined with the resulting very high levels of utilisation, have allowed freight rates to remain at historically unprecedented levels and imply that some potential freight may be being suppressed.”

Performance indicators, including skipped ports, continue to compared poorly with pre-pandemic levels, he added.

The quarterly report assesses container shipping across eight key metrics that include capacity, costs and revenues, competitiveness, connectivity and service performance. The latest report covers the period where the Suez Canal blockage and the closure of Yantian was felt of schedules and port calls.

But even these events were “barely discernible” in a “globally consistent picture of rising rates, declining service and ships sailing at close to their maximum capacity”.

It found that carrier profitability was soaring and showed the continued growth of the average earnings per container carried compared to the unit costs of carrying that container, which had barely changed over the course of the past 18 months.

Globally, carriers are earning more than twice per container than at the start of the pandemic, the report showed.

“What none of the industry metrics show are the huge numbers of shipments that are not being moved; the boxes left on the quay, stacked in the terminal or stockpiled in export warehouses awaiting a slot,” said GSF director James Hookham. “Getting these goods to market will be the difference between economic recovery and empty shelves and consumer price inflation.”

He warned that the solvency of thousands of businesses that were banking on the peak season to get them through the pandemic downturn was at stake.

“Governments need to look closer and harder at a shipping market that is out of control,” he said.

By James Baker
Source: lloydsloadinglist.com

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