News Shocks, price surges and supply issues

Shocks, price surges and supply issues

Disruptions and elevated costs are set to continue for the global shipping sector.

Shipping sector challenges are expected to continue for at least another year, despite a flicker of light at the end of the container.

According to RaboBank’s Global Ocean Freight Outlook report, while global container freight prices are set to continue to gradually decline over the coming 12 months – from the outrageous highs reached last year – they are not expected to return to pre-pandemic lows.

The shipping industry has been impacted by wider influences, including weaker global economy and consumer confidence, higher operational costs, geopolitical uncertainties and imbalanced trade flows.

These “shocks”, the World Shipping Council (WSC) identifies, have been unprecedented – but there is a glimpse of hope for exporters. The WSC predicts that this situation will normalise once consumer demand stabilises and new containers enter the market – a 4 per cent increase in vessel capacity is expected for 2023.

While the end might be in sight, it’s been a hard slog for exporters, says the Southern Hemisphere Association of Fresh Fruit Exporters (SHAFFE).

“Southern Hemisphere producers estimate an increase of costs by 3.8 billion USD through the increase of container prices by round about 150 per cent for 2022,” SHAFFE said in a July declaration.

“While the sector demonstrated its resilience during the past two years of the COVID pandemic, the current global supply chain challenges have been leading to cascading negative effects for all parts of the industry.

“The sector has experienced increased costs in multiple areas including: 150400% in container prices, 20% in truck transportation up to 80% in airfreight, up to 100% in, up to 100% in fertilizer costs and up to 100% in wood pallets prices.”

While the record-breaking rates for shipping have begun to soften, the RaboBank report stated, and “spot rates having retreated from irrational high levels in Q4 2021” – they remain three to five times above pre-2020 levels.

Long-term contract rates have also risen significantly and remain elevated, it said.

The WSC has underlined that it isn’t a quick fix – as even with greater capacity the “traffic jams” will still exist. v

4 per cent increase of vessel capacity expected by 2023

Prices set to decline over the next 12 months, but remain above pre-pandemic rates

Geopolitical uncertainties still exist Low consumer confidence and heightened inflation still exists

Imbalanced global trade flows removing container capacity from network circulation

Growing operational costs from energy and sustainability regulations