Deugro expects market volatility to continue in 2022

Deugro expects market volatility to continue in 2022

Freight forwarding and project logistics specialist Deugro expects the current market volatility to remain well into 2022, as persistently strong demand keeps lifting charter rates. 

The current market reflects a rate of $52,000 a day for a typical 4,000 TEU Panamax, the company said in its latest market report.

While this is 10 times higher than achieved by shipowners just five years ago, the rate is hypothetical, given the lack of open tonnage.

The market in the project logistics sector has become steadier and firmer, with many new projects, especially in the wind industry, moving cargo volumes consistently throughout 2021.

The demand in the container segment can no longer be fully covered due to a lack of equipment and transport capacity. Container customers are therefore looking at alternative transport options which they are finding in the bulk and MPP segments.

A sharp rise in fuel prices has been observed in the last six months, which has been passed on to the shippers, Deugro noted.

The number of expected newbuilds is down to 10 ships for 2021, which will not bring a significant increase in overall capacity.

The market is witnessing higher ocean freight rates and limited willingness by the carriers to negotiate. Currently, most of the carriers have fully booked their ships for the next eight to 10 weeks.

Deugro further added that the Toepfer’s Multipurpose Index (TMI) has increased by over 61 percent year-on-year, reaching $10,285. The TMI represents the monthly average time charter rate assessment established by a panel of operators, owners and brokers for a six to 12 months time charter for a 12.500 tons deadweight MPP/HL “F-Type” vessel.

Likewise, UK-based shipping consultancy Drewry lifted its Multipurpose Time Charter Index by 7.1 percent in June to $8,934 per day.

Deugro stresses that congestion challenges remain in major ports in China and the United States, and many ports are struggling to cope with the operational challenges of increased distancing controls and protocol while handling significantly more volume with less workforce.

There is a lack of vessel availability, especially in Asia, and long lead times for bookings.

As a solution, Deugro calls for identification, assessment and understanding of the global supply chain and logistics risk. The company noted that scheduling shipments and planning well in advance could allow the companies to met requested schedules and to anticipate longer lead times.

Furthermore, Deugro notes that alternative modes of transportation such as Ro/Ro, breakbulk, land, rail or air should be taken into consideration.

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Author: Adnan Bajic

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