A TROUBLED QUARTER FOR 2021

• Bunker prices

When hit by the covid-19 pandemic, all the major oil producing nations had cut down production which created an imbalance in demand and supply leading to US$35 per barrel to US$55 per barrel. This increase was reflected in freight prices.

• Restrictions in international borders.

When the international borders were closed and fewer flights operating, businesses had to shift from air cargo to sea cargo, further causing an increase in demand for freight capacity and containers.

• Unexpected recovery

With the closing of borders, businesses cutting on their inventory and shipping companies cutting their capacity on major routes. As economies open up and business sectors demand goods to rebuild their inventories, As the global demand recovered strongly, shipping lines could not meet up with their supply leading to a competition for ocean freight capacity which pushed the prices further up.

• Trade imbalance

Some countries like the US had a slower recovery causing exports to be lower than before the pandemic while some like China are experiencing a faster recovery and are exporting more than they did pre pandemic. The imbalance in world trade has caused more empty containers that needed to be displaced, further contributing to the shortage in available containers and higher freight rate to keep on increasing. 

• Closure of Yantian Port

To worsen the matter, the world’s 4th largest container port- Yantian port in China closed down. This led to congestion at the other ports causing delays.  

• High demand 

China is known to be the largest manufacturer and  exporter in the world and western countries are heavily dependent on the latter. They are willing to spend double or triple the usual freight rate in order to procure goods from china.

• Delays and cancellations – Last minute cancellations and delays are one of the reasons for the surge in freight prices as well.

HOPE FOR RECOVERY

Container liners have ordered 229 additional ships (2.2 million TEU) to meet demand which will be ready for use in 2023. We can hope for a decrease in shipping cost and freight with an increase in freight capacity. We can expect an increase in inflation, however, there is also a ray of light for economic growth in our Mauritius.