MARITIME research and consulting firm Drewry has released highlights from its 3Q21 Container Forecaster, including its container shipping demand and supply/demand outlooks, annual freight rate forecast and industry profit outlook.
Drewry’s Simon Heaney said, “Supply chain disruption continues to be the primary driver of pretty much all of our forecasts,” adding that much of this disruption is caused by the continuing COVID-19 pandemic.
“Our previous position was the supply chain disruption would be cleared by the second quarter of 2022… but in the recent container forecast we extended the recovery timeline to the end of 2022,” Mr Heaney said.
“I don’t think anyone can confidently predict when this mess is going to end unfortunately.”
World port handling is expected to increase by 8.2% this year, an increase on pre-pandemic levels. This is a downgrade to Drewry’s previous guidance of 10.1% given three months ago.
“For 2022, we have retained our previous guidance for a 5.2% uplift, although rising inflationary pressures, partly as a direct consequence of supply chain inefficiencies, stand out as a downside risk,” Mr Heaney said.
Drewry is predicting that fleet growth will lag behind demand growth this year and next, but that the story will flip from 2023 onwards as the record amount of recent newbuild orders start to be delivered.
“We’ve seen a recent frenzy of orders for new containers and they will start to hit the water from 2023 onwards and we anticipate there will be quite a significant mismatch between supply and demand from 2023,” Mr Heaney said.
“That presents a risk to carriers of overcapacity returning to the market but I think the real question is whether they will care,” he said, adding that shipping lines are anticipated to make three years of “previously unthinkable profits”.
The rise in freight rates outpaced expectations in 3Q21, as does the longevity of supply chain disruption. Hence, Drewry has been forced into a significant upgrade for pricing.
“We are now expecting average global rates (spot and contract) to rise by 126% in 2021,” Mr Heaney said.
For 2022, strengthening contract rates will more than offset a softer spot market, resulting in an expected overall increase of about 6%.
Drewry’s Nilesh Tiwary said, “This year is going to be phenomenal for the container shipping industry”.
Given the freight rate development in 3Q21, many carriers are now predicting higher results for 2H21. In the first six months EBIT margins averaged 37%, with some carriers going above 50%.
Drewry’s revised profit forecast for 2021 is now US$150 billion, with a margin of 30%. This is more than carriers made in the previous 20 years ($109 billion).
“We expect 2022 to be slightly better than 2021, presuming that the whole situation of supply chain bottlenecks will continue until next year,” Mr Tiwary said.
Drewy is anticipating an industry EBIT of US$155 billion in 2022 at a margin of 28%.
After analysing the cashflow statements of 11 major shipping lines, Drewry concluded that a substantial portion of cash generated has gone towards debt repayments.
Of the US$44 billion in profit made by these 11 companies in the 18 months ending after the first half of 2021, US$43 billion has been spent on debt repayment.
