Allen Timmons 
Ocean freight charges have reflected difficulties with lack of limited container space, port congestion, truck shortages and increased freight rates. The blockage of the Suez Canal led to a financial hit to the US Dollar as well as taking a hit to international trade.
But there is hope in 2022. Per Shiphub.co, is estimated that a drop in ocean freight rates in the second half of 2022. While the rates will drop, it is anticipated that they will not go as low as they once were in 2019.
COVID19 impacted a lot of things including the shutdown of many factories, a slowdown in manufacturing causing halts or extending out production of products and materials. Demand, however continued to surge. This caused pressure on shipping agents, while they too had COVID19 precautions to adhere to causing further complications.
The graphic below shows the trends for 2019 through 2021 relative to ocean freight rates and how they began to climb in 2020 and how they have continued to rise in 2021.
Ocean freight rates in 2019 and 2020, China-Europe (in USD, 40′ HC)
Shipping rate estimates in 2021, China-Europe (in USD, 40′ HC)2022 Forecast in Transportation & Logistics
Space availability on Ships
Transport capacity decreased by over 3.1 Mil TEU (12.5% of sea transport) in 2021 due to delays caused by container space issues.
It is anticipated there will be more shipping spots and containers for hire in 2022, making it easier to secure a place for a container, therefore increasing export of container shipments by 2-3% in 2022.
Availability of Ships
The chart below shows the anticipated growth in container ships through 2023.
It is forecasted that the ocean freighters will increase and expansion into new shipping markets such as Taiwan and Thailand, will bring new containers (anticipated 46 new containers) to market. At least 22 large container ships (COSCO Shipping, CMA, OOCL, and MSC) plan to debut in 2022. Wan Hi Lines, a Thai carrier, intends to expand its Trans-Pacific transport as well. Thailand also wants to launch new container lines by 2025, claiming it will order several containerships.
Port Congestion
Port capacity has been an issue, especially in the Suez Canal. There have been issues to where up to 100 vessels waited for their turn to the port. Limited staffing has been part of the issue, along with the port having not been adapted to accommodate ultra-large containerships.
The chart below shows comparisons of ships that were dwelling over five days’ time to get through port.
Staff Shortages
COVID19 brought on challenges with staffing, but there are also many vacancies in the supply chain including warehouse managers, warehouse operatives, and truck drivers, and movement restrictions all attributing to delays in port availability.
Rising Fuel Costs
The rise in price of crude oil and natural gas has been a major contributor to the entire supply chain. In a single year, marine fuel (average bunker) increased by 74%.
While natural gas prices are forecasted by Energy Information Administration (EIA ) and (International Monetary Fund) IMF to lower in 2022 and 2023, crude oil production in the US will likely rise which could see a decline in overall crude oil prices, per EIA. See charts below for their forecasts.
Global oil consumption outpaced oil production from 2H2019 through all of 2021. This led to low inventory and big increases in crude oil. Investment restraint from US oil producers, supply disruptions and curtailments by OPEC+ members restrained the production of crude oil. However, the EIA forecasts that rising production will build inventories in the second half of 2022 and through 2023, thereby bringing down prices of crude oil. The price of Brent crude oil averaged around $71 per barrel (b) in 2021. The EIA forecasts that the current price is around $80/b and will drop to an average of $75/b in 2022 and even lower in 2023 to $68/b.While this is good news, it is recommended to collect data and design transportation routes that offer the optimal savings.
Ocean Schedule Reliability
Ocean reliability reached its lowest in December 21, declining from 33.2% in November down to 32.0% in December. It dropped to the lowest ever recorded by Sea-intelligence since the start of measuring in 2011.
Ocean reliability improved in over half the trade lanes in December 2021 from November 2021. Asia-Africa improved +6.8%; Europe-Asia +6.5%, Middle East-Asia +5.7%. However overall performance was down in Middle-East-Europe -12.8%, Indian Subcontinent-Europe -12.4% and Europe-Middle East -10.8%, making overall reliability low.
Reliability on all major East-West lanes went well below the global average of 32% (Asia-NAWC 10%, Asia-NAEC 19%, Asia-North Europe 23%).
Congested ports due to lack of equipment, poor fluidity of container movement, lack of room for containers and ships all contribute to schedule unreliability. The lack of space in particular leaves container ships sitting idle, causing further delays in cargo and shipments.
The average delay is around 7.34 days causing late arrivals after scheduled berth time. This has caused many shippers to consider using Less than Container Load (LCL) carriers which typically are more readily available. However, LCL shipments face some of the same issues such as port congestion.
Port congestion needs to be a top priority, followed by schedule reliability. The Biden administration have outlined a number of steps to “accelerate investment in ports, waterways and freight networks,” along with a recently signed infrastructure deal which hopefully will begin to alleviate many of the port congestion issues so that shippers can focus on schedule reliability.
Summary
In summary, with the anticipated increase in personnel, decrease in crude oil and natural gas prices, the increase in number of available container ships, and with the COVID19 decreasing in infections, and the actions taken by the Biden administration to help alleviate port congestion, experts anticipate that freight rates will see a decrease in and around 2H2022. It is also anticipated that lead times may go down as schedule reliability improves.
Works Cited
1. https://www.shiphub.co/freight-rate-forecast-2022/
2. https://knoema.com/infographics/ncszerf/natural-gas-price-forecast-2021-2022-and-long-term-to-2050
3. https://www.greencarcongress.com/2022/01/20220113-eiaoil.html
4. https://www.dhl.com/content/dam/dhl/global/dhl-global-forwarding/documents/pdf/glo-dgf-ocean-market-update.pdf
5. https://www.supplychaindive.com/news/ocean-shipping-carrier-schedule- reliability/610810/.
