Supply chain crisis won't end til consumer demand falls, say world's largest shipping firms

Tue 7 Sept 2021
Posted by: William Barns-Graham
Trade News

Maersk

Ongoing congestion and inflation crises in global shipping won’t go away until consumer demand falls, according to a Maersk chief executive.

Morten Engelstoft, the chief executive at Maersk-owned APM Terminals, said the sector had to break out of a “vicious circle”.

Speaking to the FT, Englestoft said: “We need lower [consumer demand] growth to give the supply chain time to catch up, or differently spread out growth. Over a long period of time, we will need to recover efficiency.”

Ports need investment

Soren Toft, chief executive of the world’s second-largest container shipping group MSC, has said that the seeds of the current problems precede the pandemic and centre around the industry having out-of-date infrastructure.

“Port complexes were becoming old, there were capacity restrictions [and] there were restrictions on the ability to serve the ever-growing size of ships,” he told the FT.

No let up this year

Reporting on six-month profits that were up almost tenfold recently, Hapag-Lloyd chief executive Rolf Habben Jansen said he saw no let-up in tight shipping capacity this year.

“The world economy is recovering and that boosts demand, which coincides with clogged up ports caused by the coronavirus crisis,” he told Reuters.

“There is an imbalance between supply and demand and that’s why it remains tight.”

‘Stratospheric’

The Loadstar reports cargo owners hitting out at “stratospheric” freight rates and shipping lines’ huge profits.

A report by MDS Transmodal and the Global Shippers Forum (GSF), said that with carriers “effectively full” at 90% utilisation on most tradelanes, freight rates were at historically unprecedented levels.

GSF director James Hookham said shippers faced a “meltdown” of the container shipping market with “rates in the stratosphere, slots up for auction and service performance in the trash”.

Shipping lines costs up too

However, lobby group Shipping Australia claimed there had been a “massive surge” in the costs of operating a ship.

CEO Melwyn Noronha said: “Misleading statements from certain elements in the shipper community are painting a false picture of the shipping industry, which has been highly resilient and provided excellent value for money right throughout the pandemic, despite all the restrictions imposed by governments.”