Ad Code

Ticker

6/recent/ticker-posts

Container Shipping Near-Term Prospects Remain Strong


Container shipping is poised for another very strong year in 2022, but Fitch Ratings expects challenges in 2023, which could result in a test of the industry’s discipline or whether companies are better placed than in the last downturn, given the high cash balances, more consolidated market positions and diversifying bolt-on acquisitions.

We expect container shipping companies’ performance to remain strong in 2022 as container freight rates stay exceptionally high – despite some moderation since February 2022, due to port congestion stemming from the prolonged Covid-19-related operational disruptions. We envisage the contracts signed to secure capacity for 2022, which were likely at higher freight rates than in 2021, will support container-shipping performance. New vessel deliveries will not be large enough to reduce freight rates until 2023 at the earliest.

Furthermore, we anticipate any further disruptions in the supply chain to stall any near-term easing of port congestion. Covid-19-related restrictions limited the availability of port workers and trucking capacity, leading to longer waiting times. Port congestion on the major US West Coast ports has eased slightly recently, but this could be short-lived as overall outbound trade volumes out of China recover following Shanghai’s re-opening. The port congestion issues were the dominant reason for the increase in container freight rates to exceptional levels over the past 18 months.

While we expect 2022 to be another strong year for the industry, we anticipate that the Covid-19-induced consumption of goods over services, and other inefficiencies in the supply chain, will fall significantly. In addition, an increase in vessel supply from 2023, as the orderbook contracted from 2020 starts to get delivered, could suppress freight rates. Higher vessel capacity in 2023 is likely to lead to overall vessel supply exceeding demand by close to 4pp.

Post a Comment

0 Comments