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WHAT IS GOING ON WITH OCEAN FREIGHT RATES AND EXPECTATIONS FOR 2021

Below stated brief market dynamics in 2020:

Due to the pandemic global market for container shipping fallen down about 10% within period of Jane-June of 2020 (compared to same period of 2019). Since July rates started to show growth and it been expected that increase would traditionally last up till October – even though end of 2020 showed unprecedented practice for shipping world – within several months rates increased two-four time (depending on the direction). As an example for the China-Black Sea trade December levels increased as following:

 

– from USD 1500/20′ ==> to USD 3900/20′
– from USD 2500/40′ ==> to USD 7500/40′

 

This week the Shanghai Container Freight Index (SCFI) reached a new all-time height of 2,311.71 (up 162% in the same week last year) and continues to rise.

 

Reasons which leaded to current situation:
* increased demand for goods – many people got additional savings which in life without a pandemic would have been spent for travelling. In addition there is a fact of suppressed consumption – the population in different countries began to buy goods which they refused while very beginning of the year;

 

* after pandemic started – in order to reduce their costs container lines have canceled some of the routes and/or replaced them with vessels with a smaller capacity – as a result with the current market demand, there is a shortage of free space on the vessels;

 

* after arriving to destination ports with import lots of empty containers were not evacuated back in tine – as a result, an imbalance appeared in the movement of empty equipment around the world;

 

* China resumed work after the epidemic much earlier before other countries in Southeast Asia did that – respectively in additional to standard volumes now China handling additionally export the flows of those countries that are still unable to carry out shipments in full due to quarantine;

 

* above mentioned facts leaded to boom for empty container and space demand – container lines used that and now heating up situation to maker market grow.

 

What to expect:
* the unprecedentedness of the current situation does not allow to make any firm forecasts even in the medium term;

 

* mainly experts and analysts agree that January will be high season due to pre-New Year rush of shipments (before the start of the Chinese New Year). The situation will last at least until early spring 2021;

 

* market rates will depend on how quickly all main world trade countries resume full operations / production – i.e. how quickly the world will return to the previous established trade corridors in containers;

 

* container lines will definitely try to maintain high levels as long as possible and there is no reason to expect them to return to the level of early 2020 in the nearest future. Experts expect 2021 level as fact market will stabilize on the mark abt +30% above 2020 ocean freight levels;

 

* the above mentioned comments / expectations in relation to Ukraine are applicable to import traffic flows. In terms of rates for exports from Ukraine, container lines have made several attempts to greatly increase rates, but so far the market has not accepted these increases and most likely we do not expect a strong jump in rates in exports in the first quarter of 2021.

 

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