What influences the current excessive shipping rate volatility?

Extreme shipping rates continue to rule the freight industry, and this apparent instability is expected to stay well into 2022 and possibly into 2023 according to a number of trade related analysts.

We’re often asked what is making shipping rates so high and when will they stabilise'

There are a broad variety of opinions as to why ocean shipping prices have spiralled and continue to remain so high but there are certainly some common factors that most analysts agree have contributed most significantly to the current climate.

The Global Coronavirus pandemic most certainly has caused and continues to pose uncertainty and operational disruption across the Globe with Ports and Airports still periodically closing or limiting activities due to regional spikes in outbreaks. This of course then impacts on schedules through diversions and ultimately backlogs. If the containers cannot depart their origin point on time then it goes without saying they cannot then proceed to their ultimate destination, be offloaded and thus
re-positioned as available units again. The situation adding to the ongoing shortage of equipment.

Panic buying on a wholesale level as some experts have pointed out have also contributed to current market conditions with buyers placing orders in a race to secure space with a ‘just in case’ approach rather than a measured view to their own supply / demand requirement. Perhaps this also helps explain why warehousing space across all major commercial hubs have now too become extremely difficult to acquire.

With this increased demand port operations have been adversely affected. Combined with periodic closures due to pandemic related incidences as mentioned previously and schedule disruptions, the sheer volume of containers arriving at any one moment through Key gateways have caused significant delay in turnaround times and on occasion cut and run situations.

Then of course there’s the well publicised lack of haulage, which is explained through a shortage of heavy goods trained drivers but can too be attributed to the increased volume and congestion at ports and other inland terminals. A driver allocated to a load can spend several hours just waiting to pick up his container before even starting his onward journey to deliver.

Finally, the vessel operators whom some believe have driven the high pricing in being slow to re-enter tonnage following a reduction to schedules at the start of the pandemic. For many shippers the view of steamship operators has never been so negative, finding it difficult to accept the vast majority of these businesses making record breaking profits yet not fulfilling service obligations. There appears to be a growing lack of trust from shippers whom are provided pricing based on dated validity but are then unable to obtain the quoted charges when booking, either due no space availability within the date range or if space is offered it comes with a premium, effectively asking for a guarantee.