Checks and balances on container rates

May 10, 2021 Inventory of Hazardous Materials (IHM)

In shipping there have been clear winners and loser in the global war against the Covid-19 pandemic. In the latter camp sit cruise ships and to some extent tankers, who have seen earnings spike from storage demands only to fall back as international oil demand waned.


In prime position in the winners’ circle are container ships. Freight rates have climbed ever higher since the start of the pandemic and while they were starting to settle towards the end of the first quarter, the mishap with the Ever Given in the Suez Canal gave them a shot of adrenaline.

This renewed growth has raised concerns that inflated container freight rates will hamper the ability of the world economy to recover, with shipping rates a major component of trade costs.

In a policy brief, UNCTAD has examined why container freight rates surged during the pandemic and what can be done to avoid a similar situation in the future – although container ships operators might prefer those increases to go unchecked.

Container rates have a particular impact on global trade, since almost all manufactured goods – including clothes, medicines and processed food products – are shipped in containers, UNCTAD noted. “The ripples will hit most consumers,” said Jan Hoffmann, head of UNCTAD’s trade and logistics branch. “Many businesses won’t be able to bear the brunt of the higher rates and will pass them on to their customers.”

At the start of the Covid-19 pandemic, expectations were that seaborne trade, including containerised trade, would experience a strong downturn. However, changes in consumption and shopping patterns triggered by the pandemic, including a surge in electronic commerce, as well as lockdown measures, in fact led to increased import demand for manufactured consumer goods, a large part of which is moved in shipping containers, noted UNCTAD.

This was supported by the lessening of lockdown measures, recoveries and stimulus packages that supported consumer demand, and inventory-building and frontloading in anticipation of new waves of the pandemic, which all contributed to more demand for containerised services.


Source: hellenicshippingnews


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