Pandemic drives sea freight prices to record highs with disrupted logistics, Energy News, ET EnergyWorld


London: Container ship prices hit record highs around 18 months after the coronavirus pandemic broke out, which disrupted maritime logistics chains and spiked demand.

“We’re basically running out of ships and empty containers,” Alan Murphy, head of consultancy Sea Intelligence, told AFP.

“There is a massive shortage of empty containers, they are in the wrong place, they are stuck in ports and not ready for loading in Asia.”

The Freightos Baltic Index, a benchmark for important shipping routes, has more than tripled within a year to almost 7,000 US dollars (5,900 euros) for a trip from China to the west coast of the USA.

A trip to Europe exceeded $ 10,000, compared to just $ 1,600 at the same time last year.

Murphy said the unprecedented situation had exacerbated the problems of the past 10 years, which he believed were “really bad for the shipping companies”.

Affected by overcapacity in the industry, he said companies “lose money every time they move a container”.

– “Unprecedented decline” – The Covid-19 pandemic, which initially brought global shipments to a virtual standstill, bodes ill for the industry and resulted in “an unprecedented decline in demand,” said Didier Discountu of Lombard Odier Investment Managers.

However, this did not reflect the trends among U.S. and European consumers who stopped investing in restaurants, theaters, or went on vacation during the lockdown and instead used their money to buy material goods – many of them imported from Asia.

“Imagine how many TVs you can buy if the four of you don’t ski for a week?” said Paul Tourret, director of the French Higher Institute of Maritime Economics (ISEMAR).

Disruptions in loading and unloading operations, from sick port workers and Covid restrictions to unforeseen events such as the ship jam that blocked the Suez Canal in March, have only exacerbated the trend.

As a result, shipowners have never been in better shape.

The Marseille-based container and shipping company CMA CGM, for example, achieved a net profit of more than 2 billion US dollars in the first quarter of 2021 alone, 40 times more than in the previous year.

The Danish competitor AP Moller-Maersk announced an even higher net profit of 2.7 billion US dollars for the first three months of the year – 13 times the previous year.

-‘Highlight reached’- “It is true that shipowners are making a lot of money at the moment,” said Tourret.

“But it’s also a way for them to renew their fleets and accelerate their liquefied natural gas (LNG) programs,” he added.

In April, CMA CGM ordered 22 container ships, more than half of which run on LNG.

Maritime transport is “one of the main emitters of sulfur dioxide”, said the French expert, adding that although the figures per tonne transported are cheap, the sector still emits “CO2 emissions comparable to Germany”.

The price of container transport depends on demand, but also on the supply-side capacity to meet it. “Whether or not shipowners decide to go to a trade war is an important factor,” said Tourret.

“None of them have an interest in lowering prices. Their common discipline today must be not to sell out,” he added. The situation could persist, Tourret said, driven in part by the need to transport perishable goods.

“If you’re transporting perishable goods that are worthless if they don’t move, how much are you willing to pay?” he asked.

Jean-Marc Lacave, the executive director of France’s maritime service professions, Armateurs de France, said he did not expect things to return to normal before the first quarter of 2022.

“I think we have reached a climax,” he said. “If demand continues to rise there is a not inconsiderable risk that prices could rise again, but we are more or less at the top of the curve,” he added.


Leave A Reply