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2021 – The Year of the Carrier and Supply Disruptions.. Shipping and Freight Resource – Annual Review 2021

The view from the top - Shipping and Freight Resource - Annual Review 2021

If 2020 heralded the serious onset of the COVID-19 pandemic, then 2021 was the year that the after-effects and side-effects of the pandemic really hit home and boy did it hit hard, sparing no one globally, least of all global supply chains..

2021 saw widespread disruptions in the industry globally, characterized by

  • serious port congestion, caused by a combination of the impact of COVID-19 pandemic, port inefficiencies, an increased trade demand and not to mention the brief but disruptive blockage of the Suez Canal;
  • extreme rate hikes on all trades;
  • high container dwell times inside ports both on exports and imports;
  • increased blank sailings;
  • record volumes of containers handled at various ports around the world;
  • shortage of ships and containers due to these two vital assets being held up elsewhere than required; and
  • a general confusion with no one having visibility of what was happening..

 

Global trade outlook

In spite of these disruptions, global trade reached record highs in 2021.. As per UNCTAD, global trade is expected to reach about US$ 28 trillion in 2021, which is an increase of 23% compared to 2020.. Global trade growth stabilized during the second half of 2021, increasing by 1% Q-o-Q with trade in goods reaching record levels in the 3rd Quarter of 2021 and trade in services growing at an increased pace, but remaining below pre-pandemic levels.. Trade growth has remained uneven across countries and sectors, but with a broader base in the 3rd Quarter of 2021 than in the 1st and 2nd Quarter of 2021..

UNCTAD statistics shows that global trade in goods set a new all-time record in the 3rd Quarter of 2021 with a value of about US$ 5.6 trillion growing 0.7% Q-o-Q, while the value of trade in services was about US$ 1.5 trillion growing 2.5%.. The trend of a slower growth for the trade in goods, as well as a more positive trend for services, is expected to continue in the 4th Quarter of 2021 with the value of trade in goods expected to remain constant at US$ 5.6 trillion while the trade in services is likely to continue to recover slowly..

 

While the positive trend for international trade in 2021 seems to have been largely as a result of strong recovery in demand on the back of subsidised pandemic restrictions, economic stimulus packages, and increases in commodity prices, the forecast for 2022 remains uncertain due to several factors such as :

  • Slowing economic recovery in the second half of 2021 mostly due to the slow economic growth of China in the 3rd Quarter of 2021 which was below expectations and lower than in previous quarters..
  • COVID-19 disruptions continue in many economies, including in the EU and this could negatively affect consumers’ demand and ultimately be reflected in trade statistics for the upcoming quarters..
  • Global semiconductor shortage due to unprecedented demand has disrupted many industries especially the automotive industry and if this persists, could continue to negatively affect production and trade in many manufacturing sectors..
  • Geopolitical factors such as regionalization of trade flows and implementation of regional trade agreements, such as the African Continental Free Trade Area and the Regional Comprehensive Economic Partnership could influence global trade patterns due to an expected increase in regional trade cooperation within Africa and within the Asia-Pacific area..
  • Debt burdens such as additional borrowing by governments to sustain their economies during the COVID-19 crisis could pose continuous risks of financial instability in many countries and negatively affect investments and international trade flows, especially for developing countries whose fiscal policy space is limited..

Apart from the above major factors, the economic recovery from the pandemic in 2021 has been characterized by large and unpredictable swings in demand, which have resulted in increased stress on supply chains, brings us to a never before seen scenario of disruptions in logistic networks and unprecedented increases in shipping costs.. The backlogs created by this increased demand has had a major impact on global supply chain hubs negatively affecting trade and reshaping trade flows across the world..

 

Maritime performance in 2021

While the COVID-19 pandemic ravaged global trades, economies, and many industries, the maritime industry seems to have defied the COVID-19 disruption with a less than feared impact in 2020.. Volumes fell less dramatically than expected and had rebounded by the end of the year 2020, laying the foundation for a big transformation in global supply chains and new maritime trade patterns emerging in 2021..

Maritime trade contracted by 3.8% in the first half of 2020 with global volumes returning for both containerized trade and dry bulk commodities by the end of 2020 setting the stage of a solid year for 2021.. UNCTAD attributes the better than expected performance of the maritime trade to the fact that the COVID-19 pandemic unfolded in phases and at different speeds, with diverging paths across regions and markets..

However, while the maritime trade took a comparatively less beating, one of the KEY elements of the maritime trade took a severe beating and that element was the “Seafarers”.. While the maritime industry was able to mitigate the shock and disruption the seafarers faced a precarious situation as the pandemic triggered an unprecedented global crew-change crisis.. Due to the restrictions imposed on global travel, hundreds of thousands of seafarers could not sign off from ships to return home for their breaks while an equivalent number were unable to join their ships and to provide for their families..

Hundreds of thousands of seafarers were stuck onboard various ships across the world as various countries enforced crew sign-on/off restrictions at various stages, some for months on end, even without pay as their contract periods ended and without a replacement on board..

While the exact number of crew deaths due to the COVID-19 pandemic is not known, there are at least 12 known fatalities including that of Capt. Angelo Capurro an Italian national, whose story highlights the plight that the seafarers face on a daily basis in trying to keep global trade alive..

Capt. Capurro was the Captain of containership MV Ital Libera and joined the ship in South Africa on March 28, 2021, to commandeer the ship on its South Africa/Far East service.. On the 2nd of April, he shows symptoms of COVID-19 despite having tested negative on the 26th of March before leaving Italy for South Africa to join the ship.. Without going into more detail, his condition onboard the ship deteriorated, eventually resulting in him passing away on the 13th of April 2021 at sea.. But there was no suitable place on board the Ital Libera to keep the corpse, meaning Capt. Capurro’s body remained in a storage room for six weeks..

In the interim period, it has been reported that his wife along with the ship operator Italia Maritima, the Italian Ministry of Foreign affairs, and multiple Italian embassies appealed to a number of countries to disembark Capt. Capurro’s body.. But, Indonesia, Singapore, Malaysia, Thailand, Vietnam, South Korea, the Philippines, and South Africa had all implemented COVID-19 restrictions that banned the disembarkation and repatriation of his remains..

After the Ministry informed the company of the rejections, Italia Marittima declared a force majeure, cancelling the commercial voyage, and sent the vessel on a humanitarian mission from Indonesia to Italy to return Capt. Capurro’s body to his family.. His remains were eventually delivered to the family 2 months after he passed away on board the very ship that he commanded..

Capt. Capurro’s story is far from unique, with the bodies of at least 10 seafarers who died at sea, denied disembarkation to repatriate the remains, according to the ITF even though these seafarers did not die from COVID-19..

Many crew extended their contracts by several months to keep supplies of food, fuel and medicine flowing around the world, with some not seeing land in 18 months.. Extended periods at sea without a break has taken its toll on crews, with fatigue and mental illness a threat to safety.. An ITF seafarers poll in 2021 found that 67% of the 593 respondents reported seeing signs of mental health issues, depression, and suicidal ideation among crew members..

Globally there around 1.9 million seafarers working around the clock to keep global trade moving and ensuring that we are able to maintain our standard of living at the risk of their own lives.. As per BIMCO/ICS Seafarer Workforce Report 2021 the global supply of seafarers stood at 1,892,720, up from 1,647,494 in 2015 of which 857,540 were officers, and 1,035,180 were ratings (the skilled seafarers who carry out support work)..

The five largest seafarer-supplying countries were the Philippines, the Russian Federation, Indonesia, China, and India, representing 44% of the global seafarer workforce..

During the COVID-19 pandemic, seafarers continued to demonstrate great professionalism and dedication, supporting the delivery of food, medical supplies, fuel, and other essential goods, and helping keep supply chains active and global commerce running..

Join me in saluting and thanking these brave souls working around the clock to keep global trade moving and ensuring that we are able to maintain our standard of living at the risk of their own lives.. #seafarersmatter #seafarersarekeyworkers 

 

Maritime Trade

In terms of International Maritime Trade itself, the impact was not as dramatic as initially feared and the maritime transport sector managed to navigate through the crisis.. UNCTAD statistics shows that in 2020, maritime trade increased as a proportion of global GDP, with an increase in the maritime trade-to-GDP ratio as the pandemic induced a shift in consumer demand from services to traded goods..

The global fleet increased by an overall 3.04% in 2021 compared to 2020 across all types except for General Cargo Ships and other ships..

World Fleet - Shipping and Freight Resource - Annual Review 2021
Source : UNCTAD

 

Shipping and Freight in 2021

In 2020, global container trade fell by 1.1% to 149 million twenty-foot equivalent units (TEU) which was a better outcome compared to the 8.4% plunge in 2009 following the financial crisis.. The container volumes bounced back quickly as consumer demand increased, boosted by stimulus packages and measures to support incomes during COVID-19..

The bounce-back in 2021 brought along with it a shift in consumption patterns away from services and more towards goods, especially online purchases along with health products and pharmaceuticals to counter COVID-19 and home office equipment as work from home increased..

This surge in trade however resulted in several logistical bottlenecks globally and in 2021, the whole industry, including shipping, ports, shippers, and inland carriers struggled with shortages in containers, transport equipment like chassis and space on container ships..

This has added to severe port congestion across several port globally and reduced service levels and carrier reliability, while exponentially increasing freight rates and surcharges.. The USA ports of Los Angeles and Long Beach has been experiencing severe congestion consistently since July 2020 with it showing no signs of abating..

As of 17th Dec 2021, there were 23 container ships waiting outside of the San Pedro Bay port complex (Long Beach and Los Angeles) within a radius of 40 Nautical Miles and a further 69 container ships loitering/drifting/slow steaming heading to these ports.. There was an average berthing delay of 19.9 days..

Ocean Freight Rates

The Freightos Baltic Index (FBX) shows the exponential increase in freight rates between 2020 and Dec 2021..

Freightos Index - Shipping and Freight Resource - Annual Review 2021 Freightos Index - Shipping and Freight Resource - Annual Review 2021 Freightos Index - Shipping and Freight Resource - Annual Review 2021

This increase is not just in contract rates but also in the spot freight rates as per data from digital freight forwarder Shifl especially on the China/US Trade..

spot freight rate China to USA - Shipping and Freight Resource

spot freight rate China to USA - Shipping and Freight Resource

 

Capacity and market share

In terms of cargo carrying capacity both in terms of ships and containers, the race for top positions in container shipping continued with the number of mega ships increasing with both its number and share increasing year on year while the number of vessels below 10,000 TEUs continues to shrink..

 

 

Container shipping line Alliances and profits

Global container shipping alliances are going strong with the 3 main alliances – 2M, Ocean Alliance and THE Alliance jointly controlling 84.60% of the container market leaving 15.40% to the other lines..

global container shipping alliance

 

These alliances include 9 out of the top 10 container shipping lines in the world with the exception of Wan Hai Lines with Zim being the only container line outside of the top 10 to be part of these alliances..

In terms of the Top container shipping lines in the world, Maersk still leads as number 1 but is 1 ship away from losing its position to MSC.. The difference between these two lines at the top is just 10,783 TEUs and MSC’s orderbook is sitting at 58 ships and 993,076 TEUs which will take it way past Maersk..

As of Dec 2021, the top 10 container shipping lines in the world account for 84.7% of the world’s container capacity..

top 10 container shipping lines - Shipping and Freight Resource - Annual Review 2021

The number of container ships and containers in circulation globally stood at below as of 18th December 2021..

ships and containers - shipping and freight resource - annual review 2021

The standout feature of 2021 for carriers however would be the profits that they have made and are making in 2021..

It has been reported that container shipping pre-tax profit for 2021 and 2022 could be as high as $300 billion as per Drewry (higher than the GDP of Finland, New Zealand, Portugal among others, to put it into perspective).. The profit forecast for the container shipping industry in 2021 is $150 billion compared to $25.4 billion in 2020 which is a whopping 491% increase.. Drewry is expecting the industry to make even more in 2022..

carrier profits - shipping and freight resource - annual review 2021

To seasoned observers of the container market, typing these numbers on a page is frankly surreal” Drewry wrote in its Container Insight Weekly analysis on the industry. “Stronger-than-expected spot rate movement in the third quarter and a longer supply chain recovery timeline are behind our reason to upgrade the outlook for average global freight rates — spot and contract — for 2021.

Maersk Line, currently the world’s largest container shipping line alone may account for about 11% of the above $150 billion profits as they are expected to make a $17 billion operating profit in 2021..

AP Moller-Maersk A/S, the world’s biggest container shipping line, is now expected to make $17 billion in operating profits in 2021, up from predictions of $4.5 billion at the beginning of the year. That’s a 278% increase. The company announced this week that it would be giving each of its 80,000 employees a $1,000 bonus to celebrate.reported Fortune..

The public jury who had no idea of what shipping was, is and what it entails, is still out on whether the shipping liner industry is worthy of making such profits with many forgetting that for years if not decades, the liner shipping industry were scraping the bottom of the barrel with many lines losing heavily.. The outcry comes on the back of comparison of liner industry profits to the known profiteers in the market such as Amazon, Apple, Facebook etc..

 

Congestion, Dwell Times and Rollovers

Many were expecting that these unprecedented profits and improvement in carrier fortunes will bring about improvements in the supply chain disruptions and the operational situation at ports around the world, but it has not been the case, simply because carriers are not the cause of these problems..

Data from project44 shows that continued port congestion, increasing container dwell times in ports and regular container rollover at transhipment ports due to various reasons, has been impacting supply chain over 2021 causing severe disruptions at ports and countries around the world..

These disruptions, especially in the USA has attracted the attention of the Biden-Harris administration in Washington prompting administrative action in the form of “The Biden-Harris Action Plan for America’s Ports and Waterways” aimed at easing port congestion causing supply chain disruptions that have created headwinds for business and industry in the US with major spillovers globally..

However, especially in the USA, there is a lot of finger pointing going on with

  • Ports threatening to penalize carriers with Container Dwell Fees if the full containers are not moved out of the ports;
  • While carriers are (rightfully so) saying it is the customers who are not ready to take delivery of containers in time with at CMA CGM going to the extent of incentivizing customers to move the containers out of the port in time; (ZIM had initially announced on the 9th Dec 2021 that they would also be incentivizing, but that notice seems to have been removed from their side currently)
  • Customers on the other hand are bemoaning the lack of availability of chassis to pick up the containers in time and pointing fingers at driver shortages as well while;
  • Trucking associations are saying chassis are not available because empty containers are still sitting on these chassis as carriers and ports are not allocating space to off load these empty containers..

talk about a vicious circle..

The Federal Maritime Commission has now gotten involved in this aspect of the industry and in December 2021, the Chairman of The Federal Maritime Commission (FMC), Daniel B. Maffei appointed Commissioner Carl Bentzel to spearhead a Maritime Data Infrastructure Initiative to focus on identifying data constraints that impede the flow of ocean cargo adding to supply chain inefficiencies in the USA..

As per the FMC, “This project will aim to establish data standards and best practices for data access and transmission essential for a reliable and stable ocean transportation system.”..

As part of this initiative, starting from the 7th of December 2021, through the first half of 2022, Commissioner Bentzel will convene a series of meetings with maritime and intermodal stakeholders with initial findings presented at a data summit to be hosted by the FMC in the spring of 2022..

Commissioner Bentzel recently took part in a video discussion with Shipping and Freight Resource about the Impact of Supply Chain Disruption and Mitigation along with Shabsie Levy of Shifl and Josh Brazil of project44..

looking ahead to 2022 - shipping and freight resource - annual review 2021

Looking ahead to 2022

While we can look ahead to 2022 we may not be able to see anything..!!

That seems to be the general consensus around what lies ahead for supply chain disruptions and how long it will continue..

  • COVID-19 is still with us and will continue to play a major role in how global trade and supply chain behaves in 2022 as the pandemic traverses across all the Greek alphabets.. If you are wondering WHO came up with these Greek names, it was exactly WHO (World Health Organisation).. Read here and why..
  • Continued COVID-19 outbreaks in China, with the recent one being 14th of December may continue to impact their manufacturing and production schedules consequently putting pressure on supply chains as key items like batteries, clothing, textile, dyes and plastics may become scarce.. China’s strict ZERO COVID-19 policy while restricting several outbreaks locally on the back of mass testing, lockdowns and quarantines has not yet been able to stop the spread of the virus and the world of supply chain remains vulnerable to any outbreaks in China..
  • BREXIT – seemingly sidelined for now, could hit a bit differently in Europe with some planned changes to the import of goods, including customs declarations and border checks from January 2022 many of which are still unclear to the shipping public in UK and EU..
  • The impact of The Ocean Shipping Reform Act recently passed by the House of Representatives in the USA and the benefits of The Biden-Harris Action Plan for America’s Ports and Waterways – are yet to be known or quantified it is unknown how it will affect/assist the business in USA..
  • There are many opinions and perspectives as to why America’s shipping crisis will not end..

The other general consensus seems to be that the current situation will still continue more or less till at least the 2nd half of 2022 albeit not with such a major impact because

  • many companies have adjusted to the new normal of extended cargo lead times and may be changing their supply chain strategies to adjust to this;
  • many companies are taking steps to make their supply chains resilient and future proofed;
  • Industry studies are estimating that by the end of 2022, 50% of all manufacturing supply chains will see the benefits of supply chain resilience which is expected to result in a 10% reduction in the impact of supply chain disruption.. The study is also estimating that by the end of 2022, chronic worker shortages will prompt 75% of supply chain companies to prioritize investments in automation resulting in productivity improvements of 10%
  • 2022 will see an increased usage of data and information which will be used to predict developments and disruptions in the supply chain helping companies to make more data-driven decisions in the day to day running of their businesses

WE WISH EVERYONE A HAPPY AND SAFE HOLIDAYS IN 2021, THE BEST OF HEALTH, WEALTH, HAPPINESS AND PROSPERITY IN 2022,
and of course
WORLD PEACE.. 🙂


Credits & Acknowledgements : 

  • UNCTAD – for the trade information
  • Alphaliner – for the container liner information
  • project44 – for the congestion, dwell time and rollover information
  • Shifl – for the container spot rate information
  • FBX Freightos – for the rate charts, and last but not least,
  • CHARLIE PESTI – for just being the best darn publicist in the world for logistics

 

You can also download the Shipping and Freight Resource Annual Review 2021 as a pdf here..

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