BAROMETER. With economic conditions still unfavourable and a tense social climate, the container shipping sector is still in the woes. The fall in freight rates has now spread to the transatlantic trades.
A page was turned in the month of March. Despite the fact that the virus is still very much present, the pandemic is no longer a topic of conversation. It has been replaced by the war in Ukraine, cost of living problems and, most recently, the threat to the banking system.
The Covid episode will nevertheless be seen as having been at the origin of the first doubts about the myth that globalisation would bring prosperity everywhere thanks to the growth of international trade. The consumerist model of the 1990s is running out of steam. The climate emergency is blowing up in our faces and geopolitics has become a permanent feature of the supply chain universe.
The impact of the 24,000 TEU container ships
In just three weeks in March, two new giant 24,000 TEU container ships, the MSC Tessa and the MSC Celestino, came into the fleet of the global container shipping market leader, MSC. It has now five such ships of this type in this fleet and is not the only company to have started using ships of this size.
Sad to say, the 24,000 TEU ships are not suited to the current sluggish economic conditions in European countries, with their high inflation, increased interest rates and close-to-zero growth. There are already too many of them on the market and more are due to arrive in 2024 and 2025. They carry containers in huge quantities when demand is positive but become a millstone when they become hard to fall and revenues are low.
In the current state of the market, they are exacerbating the irregularity of the shipping services by calling too frequently in Chinese ports which are unable to adequately fill them. As a result, vessels are left waiting outside port, departures are postponed, longer passages are made via the Cape of Good Hope and very low sailing speeds are adopted.
Supply chain managers take control again
With an abundant supply of shipping capacity and low demand, we are seeing a post-pandemic reversal of the status quo, with the end of "just in case" and a gradual return to "just in time", which has been a key feature of logistic "normality" over the last 30 years. Taking account of the lessons learned during the crisis, however, the time has come to invent a new kind of just-in-time. The long-term deterioration in the quality of shipping services and the risks inherent to the use of big ships could keep alive shippers' interest in finding closer supply sources, which may be more costly but which offer them shorter transit times and greater degree of control over their supply chains.
The freight rates which currently apply on sailings from China have clearly raised the spectre of Hanjin-style company collapses. The markets seem to have short memories.