Economics

Containers: fragile stability on the main East-West lanes

April 08 2022

The combination of the slowdown in European demand, the war in Ukraine and, above all, the Omicron outbreak in China constitute a real "stress test" for the strategy of capacity control put in place by shipping companies at the beginning of the Covid-19 pandemic.

The war in Ukraine is now the focus of attention, due to the human tragedies that are taking place. This conflict also has an undeniable economic impact on the economy, and in particular on energy issues. But if we focus on the situation of container shipping, the main concern is elsewhere. The virtual closure of the Black Sea and the embargo on Russian ports are in fact only marginally affecting the operating accounts of the main container shipping companies. 

A relentlessly crippling Covid

All eyes are on China's large container terminals. Will they close, or won't they? And for how long? Much more than the War in Europe, the resurgence of Covid-19 is today THE central issue in China. Faced with this new wave of contamination, China remains faithful to its "zero Covid" strategy by instating lockdowns massively. This is particularly the case in Shanghai, where it is having a heavy impact on the economy and the supply chain.

Major manoeuvres in transport commission

Meanwhile, in Europe, the recomposition of the logistics landscape is in full swing, with large-scale and high-speed integration of strategies. The financial windfall accumulated over the past 18 months as a result of the surge in freight rates allows shipping companies to participate actively in these major manoeuvres.

Shippers in turmoil

For the moment, there are some changes but no real revolution in the freight rate markets. The good discipline in regulating supply from shipping companies is holding up well in this off-season period that had less of an impact this time last year.

This context will probably lead many shippers to carry out a complete review of their supply chain to take into account this new situation. For the time being, companies have no choice but to begin to unequivocally pass on price increases to end-customers, but acceptability thresholds are crumbling. 

MORE INFORMATION

Please enter your details below to download the whitepaper:

 

Subscribe to the newsletter


Expert in Ocean shipping for 25 years, Jerome puts all his knowledge of the industry to contribution for Upply. Ship captain at heart, he has written the English-French Lexicon of Containerized Shipping (Paris: CELSE, 2001).
See all its articles