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Pandemic drives sea freight prices to record high

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Reference:AFP | Updated:6 July 2021

Container shipping prices have reached record highs some 18 months after the outbreak of the coronavirus pandemic which disrupted maritime logistics chains and drove demand sky-high.

"We are basically running out of vessels and of empty containers," Alan Murphy, head of the consultancy Sea Intelligence, told AFP.

"There's been a massive shortage of empty containers, they are in the wrong place, they are stuck in ports and not in Asia ready to be loaded."

The Freightos Baltic Index, a benchmark for major shipping routes, has more than tripled in a year to nearly $7,000 (5,900 euros) for a trip from China to the west coast of the United States.

A trip to Europe has exceeded $10,000, compared with just $1,600 at the same time last year.

Murphy said the unprecedented situation compounded the troubles of the last 10 years, which he said had been "really bad for the shipping lines."

Blighted by overcapacity in the sector, he said the firms "were losing money every time they were moving a container."

Unprecedented drop

The COVID-19 pandemic, which initially brought global shipping to a virtual standstill, did not bode well for the industry and led to "an unprecedented drop in demand," said Didier Rabattu, of Lombard Odier Investment Managers.

But this did not account for the trends among U.S. and European consumers who during lockdown stopped spending in restaurants and theaters or going on holiday and instead used their money to purchase material goods – many of them imported from Asia.

"Imagine how many televisions you can buy if you don't go skiing for a week with four people?" said Paul Tourret, director of France's Higher Institute of Maritime Economics.

Disruptions to loading and unloading operations, from dockers falling ill and COVID restrictions to unforeseen events like the shipping backlog caused the blockage of the Suez Canal in March, have only exacerbated the trend.

As a result, ship owners have never been in better shape.

The Marseille-based CMA CGM container and shipping company for example posted a net profit of more than $2 billion for the first quarter of 2021 alone, 40 times more than the previous year.

Its Danish competitor AP Moller-Maersk announced an even higher net profit of $2.7 billion for the first three months of the year – 13 times what it saw last year.

The price of container transport depends on the level of demand, but also on supply-side capacity to meet it.

Jean-Marc Lacave, the executive officer of the body for France's maritime service professionals, Armateurs de France, said he did not expect things to return to normal before the first quarter of 2022.

"I think we have reached a peak," he said. "If demand continues to rise, there is a not insignificant risk that prices could raise again, but we are more or less at the top of the curve," he added.


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