The forecast for ocean container freight presents a somewhat choppy and uncertain but surprisingly robust horizon.
A new report from the United Nations Conference on Trade & Development (UNCTAD) expects global maritime trade to plunge 4.1 percent in 2020 due to the unprecedented disruption caused by Covid-19.
In its “Review of Maritime Transport 2020” report, UNCTAD warns that new waves of the pandemic that further disrupt supply chains and economies might cause a steeper decline. The pandemic has sent shockwaves through supply chains, shipping networks and ports, leading to plummeting cargo volumes and foiling growth prospects, the report noted.
“The global shipping industry will be at the forefront of efforts toward a sustainable recovery, as a vital enabler of the smooth functioning of international supply chains,” UNCTAD Secretary-General Mukhisa Kituyi said. “The industry must be a key stakeholder helping adapt just-in-time efficiency logistics to just-in-case preparedness.”
UNCTAD expects maritime trade growth to return to a positive territory and expand by 4.8 percent in 2021, assuming world economic output recovers. But it highlights the need for the maritime transport industry to brace for change and be well prepared for a transformed post-Covid world.
At the peak of the crisis, when the contraction of cargo volumes brought an additional challenge to structural market imbalance, the report notes, the container shipping industry adopted more discipline, cutting capacity and reducing costs to maintain profitability instead of market share.
As a result, freight rates remained at stable levels despite the depressed demand. From the perspective of shippers, these strategies meant severe space limitations to transport goods and delays in delivery dates.
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To cope with pandemic-related disruptions, players in the maritime sector adjusted their operations, finances, sanitary and safety protocols as well as working practices and procedures.
In addition, several governments, through their border agencies, port authorities and customs administrations, made reforms to keep trade flowing while keeping people safe.
Similar but more upbeat sentiments and forecasts were presented by speakers at the virtual Apparel Importers Trade & Transportation Conference hosted by the U.S. Fashion Industry Association and American Import Shippers Association.
“A challenging spring was followed by a rapid increase in global demand,” John Gilmore, director of Eastern region sales at Ocean Network Express (ONE), said. “Depleted inventory from the initial halt to production and increased consumer demand has rebounded major dominant trade legs. Increased ad-hoc sailings, rates at unprecedented levels and charter rates are at their highest since 2011.”
Gilmore said there are potential hurdles to come, including port labor and ocean crew issues, especially during the holiday period. Equipment shortages to meet the surging demand have the potential to be problematic, as does intermodal rail and truck congestion and availability. In addition, warehouses are said to be at capacity, he noted.
Sam Ruda, director of the port department at the Port of New York & New Jersey, said, “cargo lines have proven most resilient during the pandemic.”
Ruda said there has been a strong cooperative effort between the port, terminal operators and labor, balancing safety and commerce. While monthly cargo volumes fell more than 16 percent in May and June, things started to pick up in July, leading to a 1.3 percent increase in August and a 15.4 percent hike in September, he added.
Gilmore and Ruda both said forecasts remain strong through the Chinese New Year on Feb. 12.
“We see full vessels right through December and onward through Chinese New Year,” Gilmore said. “The Covid numbers are certainly disturbing…and the challenge will be reading the market–for Asia inbounds, what does post-Chinese New Year look like? Do we rush to get ships back in? All stakeholders in the supply chain have learned from this and how to react and plan.”