Freight rates of container shipping contracts expected to increase in 2022

Although there has been a decline in spot container freight rates, there are still many bottlenecks and the Covid situation in China, as well as a possible labor dispute on the US West Coast, should be forecast. Expected that, the freight rates of long-term contracts will be relatively high throughout 2022.

A container vessel of ONE (Photo: ONE)

Speaking about the market, Mr. Jeremy Nixon - CEO of ONE (Ocean Network Express), said in an online meeting about energy costs, inflation, interest rate concerns and there is a Slight conversions for a more balanced return shipping service. “Consumer economy in terms of purchasing, we may see some slowdown in the 2022 in terms overall demand for container services,” added Jeremy Nixon.

However, he also noted that container ports are still heavily congested and even if demand slows, it will take time to operate smoothly.

Like its peers in the container shipping sector, ONE posted a significant change in profit from a loss of $586 million in the 2018 fiscal year (ended March 31, 2018), and has the first year of operations recorded an estimated $15.4 billion in profit for fiscal year 2021 (ending March 31, 2022).

For the January-December 2021 period, ONE reported an EBIT of $13.9 billion on revenue of $26.4 billion, with an EBIT margin of 53%, compared to an average margin of An average of 40% of the eight other shipping lines have announced the results.

While the spot rates market experienced a slump earlier this year, ONE has seen customers contract long-term rates at roughly the same, or even higher, spot market rates. Currently, in negotiations that took place at the end of last year and ended in April/May for the transpacific service.

“Those contracts have shown significant increases in the freight rates, to the extent that customers are locking in one year or even longer close to the spot market, or even higher than the current spot market witnessed to 2021. So that is a positive sign," Nixon said.

He said that, for ONE in general, its freight is in the form of a long-term contract.

Looking at spot rates, he said the drop since the Lunar New Year hasn't been as drastic as is typically seen during this period. “Since February, we've seen a slight drop off, but I would say that the level of drop off in relative terms compared with the last five years for the post Chinese New Year actually showing it's a positive development in the drop is not so significant as we've seen in the previous years."

Combined with the Covid lockdowns in areas like Shenzhen and the Ukraine-Russia conflict affecting about 2.5% of freight volumes on the Asia-Europe route, Nixon said spot rates are likely to fall. strong, but the company did not see this happen.

Nixon also noted the potential impact of labor negotiations at US West Coast ports, where the current contract expires in June of this year.

He noted that these negotiations may not be easily resolved. “So, we may see some slowdown in productivity or delays associated with the negotiations during June, July and August.”

ONE expects the market to normalize in the second half of 2022, but this could be influenced by labor negotiations on the US West Coast and Covid concerns in China. “But we remain still reasonably positive about the outlook for 2022,” Nixon said.

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Source: Phaata.com (According to SeatradeMaritime)

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