Congestion and rates may not get any worse in 2022

Aerial view container ship carrying container in import export business logistic and transportation of international by container ship in the open sea

As the year comes to an end the condition of the global logistics market remains congested, yet the prospect of market cooling appears to be possible.

Dysfunction at many major ports remains a problem, yet in-roads seem to have been made into the issue in certain locations. For example, the Port of Los Angeles & Long Beach has held off imposing a “Container Dwell Fee” due to what the Port says is a reduction of “47% in ageing cargo on the docks”. The fee is still planned to be imposed on the 20th December, with the proposal being that carriers be charged US$100 per container for containers still on the dock after nine days, increasing by $100 per day. There are still extensive queues of ships outside Los Angeles but it seems that the threats of such extreme levies have at least shifted some of the congestion problems outside the terminals.

Admittedly many of the underlying problems that have been causing the failure of marine logistics systems remain. For example, the port of Ningbo is currently experiencing acute problems related to a COVID-19 outbreak across the province of Zhejiang. The region of Zhejiang is a major industrial area and any slowing of container traffic out of here will disrupt trans-Pacific routes in particular. The nature of Chinese COVID-19 policies will remain a major driver of instability in the medium-term.

Yet, what the first two quarters of 2022 may offer is the prospect of an increasing number of new build container vessels entering service. The picture is not certain, but there is probably around 1m TEU earmarked for delivery in 2022 and this ought to have at least some impact on both prices and congestion. Admittedly, the latter may be more influenced by the growth of the size of the container fleet and the number of containers wrongly located.

Probably the most important variable will be the speed and nature of economic growth. The largest single reason for port congestion has been the huge expansion in government expenditure in the US and the consequent explosion in exports from China but also other locations such as South East Asia. The likelihood is that the US will see modest interest rate rises in 2022 and this might slow growth down a little, however of greater importance might be the possibility that demand may become less volatile. This offers the hope that rates and congestion may not become any worse if not the certainty that things will become any better.

Source: Transport Intelligence, 16th December 2021

Author: Thomas Cullen

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