Hello, it’s IINO.
I would like to broadcast IINO san’s Logistics Radio today.
Today’s theme is how long will high ocean freight rates continue?
In today’s edition of the Street Journal, there is an article in the Logistics category that U.S. port officials expect the recent surge in ocean freight rates to continue until 2022. I agree with this.
Daily Logistics Radio by IINO san in 6th Sep. 2021
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In North America from peak season until when?
Now, it is a peak season in North America, however, until when does this high rate continue?
Today, there are as many as 40 ships off at west coast of North America waiting offshore for their turn to load or unload cargo. This is in spite of the fact that offshore waiting itself was a rare condition before the spread of Corona.
Chinese New Year in February 2022
In general, September is the peak season, but even after the peak, Chinese New Year will be in February 2022.
The container backlog is currently a problem will not be resolved in a month or two, and the volume of cargo shipped from China increases before the Chinese New Year.
So, the container backlog in North America is being cleared, but cargo volumes may increase again, and it may lead to congestion at the ports.
Revision of the North American West Coast Collective Agreement in July 2022
And July 2022, the collective bargaining agreement for the West Coast ports of the United States expires and negotiations begin to revise it.
This is expected to reduce the functionality of the North American West Coast ports. The last revision of the collective agreement in 2014 took a whopping nine months to reach a conclusion.
During this time, the West Coast ports were not functioning properly and much of the cargo was transported via West Coast and the East Coast of North America of Air Canada.
Ocean freight rates to the East Coast of North America have risen at this time, so they are expected to rise in July 2022 as well.
Start of Transport for Christmas Shopping Season in September 2022
In the meantime, it will be September 2022, next year’s Christmas shopping season will begin.
If the West Coast ports of North America are not functioning well at this time, we will have similar problems to this year.
Will prices fall due to oversupply of shipping capacity?
We can not find the reason that ocean freight rates may fall until the end of 2022 as you see in the situation mentioned.
Currently, shipping companies are ordering new containerships due to the booming economy, so some may expect prices to fall due to oversupply.
However, I personally expect that the absolute amount of shipping capacity will increase, and we will not see the same recession and price decline occurred after the Suez boom in the past.
Learned from fierce price competition
It is because that shipping companies must have learned from the last recession.
Hanjin Shipping Co. of South Korea went bankrupt in 2017 and NYK Line posted a huge loss of about 270 billion JPY.
In addition, the ships that are currently being built are designed to be decarbonized and the amount of shipping capacity in the market can be adjusted, because the older ships are considered inappropriate for the environment.
Therefore I expect that ocean freight rates will also be adjusted for this reason.
Summary
As a person who works in the international logistics industry myself, I think it is a problem that freight rates are too low. A situation where shipping companies have to operate at a loss is not the healthy infrastructure function.
However, excessively high ocean freight rates are also a problem, so I hope that freight rates will quickly return to reasonable levels.
