This last factor has a strong disruptive potential on the marine industry.
«Spot tariff levels continue to fall, underlining that, in fact, we are in the transition phase back to normal explained the analyst of the maritime industry», Lars Jensen, in a comment, through his LinkedIn account. However, it also makes clear that «the decline will take quite some time before normalcy resumes, so that cargo beneficiaries should not plan based on any (similar) type of pre-pandemic short-term normalcy».
The analyst notes with interest how several shipping lines have increased their profit projections for 2022 as was the case of Maersk who raised its EBITDA prospects from US$30 billion to US$37 billion. While Jensen acknowledges that this, at first glance, seems to contradict the narrative of a declining market, he notes that the reality is that, «while spot rates are declining, contract rates for 2022 are substantially higher than those of 2021».
Moreover, it states, although some long-term contracts are under pressure (given the low spot rates) and even with some being able to be reduced, these could also be at levels higher than the observed values in 2021.
Always advising the beneficiaries of the charge, Jensen, asks to consider the data of Xeneta of 2021 that exhibited in the worst of the cases a differential of US$10,000/FEU between the rates spot in the route Asia – North of Europe., for what indicates «there was ample scope for large declines in spot rates, simultaneously with an increase in contract rates».
Congestion, strikes and politics…
According to Lars Jensen, congestion continues to affect the maritime industry (especially in the USEC and with the fear of reappearing in the USWC) and now does not seem to be closer to a resolution compared to 3 weeks ago. On the other hand, the increase in strikes, especially in Europe, where workers essentially want compensation for inflationary effects, seems to be a permanent element in the near future. This without considering the latent conflicts at the USWC in the U.S. where truckers, especially at Oakland Port, ILWU rail workers and longshoremen still do not give white smoke signals that reassure the industry’s immediate expectations.
He also argues that, as expected, there is growing political pressure to «do something» about the competitive situation in the industry; on the strategic front, this has great disruptive potential for the industry. In fact, the greater power granted to the Federal Maritime Commission (FMC) by the US Government. to monitor the behaviour of shipping lines in applying detention and demurrage surcharges and, now, to make public information on the amount of TEUs they mobilize (see note); measures to which are added the tariff discounts by CMA CGM in favor of the fight against the consequences of inflation on French consumers are the clearest examples.
But in this sense, Lars Jensen warns that «careful with what you want, you may get it», since any change will have many domino effects deep in the supply chains so he recommends all stakeholders to «Think carefully about all these aspects and don’t just look at the immediate effects of any change».