MONTHLY BAROMETER. The shipping companies have been able to maintain an average price increase despite a fall in cargo volumes. But the wartime economic mentality which is taking hold could put an end to the ongoing euphoria.
Inflation in the West, Covid-19 restrictions in China and the war in Europe. This unhappy combination had quite a strong impact on demand for shipping in April. The impact, which started to make itself felt in mid-March, was little or not at all visible in the first quarter results of the major shipping companies but some of them nevertheless warned that a great deal of uncertainty lay ahead.
"Global container demand declined by 1.2% compared to +8% in 2021, Maersk said in its first quarter results presentation. "Trade flow growth flattened from Far East to both North America and Europe. Russia's invasion of Ukraine is having a negative impact on trade flows and consumer confidence in Europe. Given this background, global container demand is now expected to grow -1/+1%, compared to an earlier expectation of 2-4%."
Continuing difficulties in China
Since early April, the whole of the container shipping sector has had its eyes fixed on China. Taking account of the realities experienced on the ground and the expected economic slowdown, given that the official growth forecast for 2022 stands at 5.5%, its lowest level for decades, several factors are causing concern:
- The effect of the Zero Covid policy, which is causing a self-inflicted blockage of production capacity.
- The increasing cost of production inputs and the difficulties in obtaining them.
- Drinking water and food supplies in the big locked-down urban centres.
- The resilience of the people living in them.
In the first quarter, Chinese growth continued to show some vigour, finishing at 4.8%. The slowdown should make itself felt rather in the second quarter and the growth lost will be difficult to make up.
Wartime economic mentality
Between China's self-generated problems and a Western world which has begun to keep a serious eye on its outgoings, at a time when the geopolitical situation is particularly dangerous, the world economy has started to seize up - slowly but, sadly, quite surely. The idea that the supply chains could smoothly recover has been ruled out. A wartime economic mentality is taking hold, with particular attention being paid to basic necessities, starting with food and energy products.
On several routes, FAK rates are currently on a clear downward trend. The massive blank sailings from Asia at present will have a particularly damaging boomerang effect on European exporters.
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