German container liner Hapag-Lloyd is expecting 2021 year-on-year growth to far outperform the levels seen in 2020 as demand continues in the container market around the world.

With strong cargo volumes dominating the market until this point in 2021, this is expected to continue well into the middle of the year, although the company expects there to be a “gradual normalisation of the development in the second half of the year,” it said in its Q1 earnings report on May 12.

Firm demand from the key exporting region of North Asia, a mainstay in the container market for the year-to-date, has caused some significant congestion and port delays across importing regions, most notably North America and Europe.

Despite this demand, Hapag-Lloyd’s transported volumes over the first quarter fell 2.6% to 2.98 million TEUs (twenty-foot equivalent units), with delays at ports and shortages in equipment, most notably available ships and boxes, largely to blame for this falling volume.

The company also noted that through the remainder of the year, the global economic conditions are expected to recover, which should boost global trade and, in turn, containerised cargo movements around the world.

Logistical issues continue to dog market

Despite the expected growth in volumes, the situation in ports around the world appears somewhat unstable at this point. Following the blocking of the Suez Canal in March, further bottlenecks have formed at both European and Asian ports which have exacerbated the equipment shortages further.

“I am struggling, my clients are struggling, everyone is struggling,” said a UK-based freight forwarder. “We pay and pay and still there is a high chance cargo will be rolled as demand is just through the roof at the moment.”

Platts Container Rate 11 – North Asia to UK – jumped significantly on the increase in FAK (Freight All Kind) rates at the start of May and was assessed at $13,000/FEU. By contrast, freight rates along this route a year earlier were $1,200/FEU, highlighting the over 10-fold increase.

Despite expectations earlier in the year that these logistics issues would be solved by Lunar New Year in February, even the most conservative of estimates now has the final quarter of 2021 as the goal for the container market to return to business-as-usual.

As vaccine rollouts across Europe and North America also continue, space on ships into June and July is almost gone with bookings continuing at pace, with importers filling warehouses in the hope of bumper sales as consumer demand bounces back.

Bunker prices, freight rates “increasing clearly”

Transport expenses fell by 14.2% in the first three months due to lower bunker consumption prices and currency effects, the company said. Prices for 0.5%S marine fuel delivered-Rotterdam averaged $413/mt in Q1 2021, compared with $417/mt in the previous year. Without March 2020’s average, prices were much higher pre-COVID-19.

Also, bunker consumption dropped and took up a lesser proportion of total operating expenses compared to the previous year. “This decline was essentially caused by a slight decrease in ship capacity compared with the prior year period and longer waiting times at and before ports.”

“At the same time, a clear increase in the average bunker consumption price is assumed, which should have a dampening effect on the development of earnings,” it said.

The company has tagged a forecast of transport volume “increasing slightly” in 2021, while bunker consumption prices along with freight rates are “increasingly clearly,” it expects.

Source: SP Global