container freight rates may decline by 40 per cent in the next decade — as it predicts volatile trends in a market that could stabilise by 2024.
Drewry Senior Consultant James Kyritsis made the remarks during the UK Ports Conference 2022 by Waterfront in London.
Economic headwinds have been recently driven by high inflation. At the same time, the Russia-Ukraine war triggered high commodity prices, Kyritsis noted.
The consultant noted that current market conditions may therefore help companies maintain higher rates and provide opportunities for commodity exporters.
Freight rates have especially peaked in the summer months of 2021, reaching levels over four times higher than pre-pandemic rates.
Whilst there has been a decline as COVID-19 restrictions in China ease, Drewry pointed out that they still remain more than three times higher than prior to the pandemic.
Kyritsis noted that Drewry expects this decline to continue gradually – and anticipates a return to normality by 2024.
The President of the Port Authority of Valencia previously predicted rates to normalise by 2023.
Looking at individual cases in the container market, Europe has suffered the heaviest blow from the pandemic as the Middle East is expected to enjoy the highest increase in container volumes estimated at 4.1 per cent.
According to Drewry, the double-digit growth in America has been heavily driven by empty containers as they allowed an increase in terms of storage while damaging productivity.
Port dwell times have significantly increased due to increased load size, uncertainty supply chain flows, and capacity constraints. Average times for vessels in North American ports were three times higher than the 2018-2019 average in 2021.
Europe and China have also seen a surge in dwell times, but not to the same extent as North America, reported Drewry.
Against this backdrop, Drewry recognises that the current trends in the container market are challenging, however, container shipping finds itself in a much healthier financial situation after years where lines struggled to maintain profitability.
“There will always be shocks in the industry that are both unpredictable and can have unexpected impacts on the industry,” said Kyritsis commenting on the market trends and forecast for the future.
“However, reflecting what these could be, and how the industry would respond to this situation, could help anticipate future challenges that may emerge.”