Global demand isn’t exactly booming at the moment with only a 4% growth compared to 2019, but shipping rates remain sky high. According to Lars Jensen, CEO of Vespucci Maritime, “global demand… [is] not a problem now. You have some skewing because of the demand boom in North America, but none of this is down to a global demand boom.. The problem right now is predominantly one of capacity.”
Congestion is choking out capacity as carriers are getting stuck in the ports of the US and Asia. Massive delays are happening due to congestion with shippers unable to give reliable shipping schedules for affected ports like in Vietnam.
Moreover, recent and new complications from the new Delta-variant outbreak to the Suez Canal blockage have been heavily contributing to the congestion in 2021.
-Lars Jensen (CEO of Vespucci Maritime)
Jensen explains: “You always have some vessel breaking down somewhere. Normally if that happens, you charter a replacement vessel or shift the cargo to another service. But now, there are no vessels left to charter and shifting the cargo to another service is out of the question. They’re already all booked. So, every tiny operational mishap adds more cargo to the pile of cargo you can’t move. And things are just getting worse.”
Now, 2022 seems to be when congestion will finally clear and shipping rates should drop accordingly from current record levels. Jensen predicts “freight rates will come down substantially from where they are today, but they’re not going back to anywhere near where they were pre-pandemic…but it will still represent a sizable increase compared [to before]”.