Carriers stand to see earnings before interest and tax rise to as much as $300bn this year on the back of higher freight rates, despite a likely fall in volumes transported. “As long as supply chain inefficiencies are in place, average global freight rates will remain elevated,” said Drewry senior research manager Simon Heaney. “We expect an increase of 39% for next year, following a 110% increase last year. Even after factoring in much steeper operating costs from higher fuel and vessel operating costs, we anticipate those increases in unit revenues should easily cater for those issues.” The inefficiencies, disruptions and port congestion that had driven freight rates and carrier profitability over the past two years were now embedded in the market and had relegated other supply and demand factors to the margins, he added.

Carriers’ ability to charge customers extremely high freight rates would be dictated by the longevity of the liner supply chain bottlenecks, which remain highly unpredictable, however. Carriers were facing a growing number of risks, ranging from geopolitical disruptions to the course of the pandemic, all of which would contribute to the time it would take for the market to normalize and return to traditional supply-and-demand dynamics. “How the twin threats of war in Ukraine and China’s zero-Covid policy affect the global economy and the existing supply chain bottlenecks is going to be crucial over the next few months,” said Mr Heaney.

Slowing growth was already visible, and Drewry has downgraded its container demand forecast for this year from 4.6% to 4.1% and for 2023 from 3.5% to 2.8%. “Slowing growth prospects are a concern to carriers but we think that as long as there is any form of growth, and any sharp contraction can be avoided, the party should keep on going from a carrier perspective,” he said. “In today’s stressed market, such are the capacity constraints that it is entirely possible for freight rates to stay extremely high at the same time as headline demand growth is falling.”

In terms of risks to the profitability forecast, carriers would be most concerned about the situation in China, and whether coronavirus-reduction policies would have more impact on factories or ports. “The pandemic has been good for carrier profitability as from a logistics perspective the primary side effect has been to create capacity shortages in nearly every link of the freight transport supply chain at a time of high demand,” said Mr Heaney. “Production outages, on the other hand, were mainly confined to the start of the pandemic, but any new factory shutdowns in China could spell bad news for carriers by forcibly choking demand for their services, and inadvertently correcting some of the capacity problems we have been experiencing.”

The “sweet spot” for carriers was for logistics congestion to be bad but not so bad that it interrupted the flow of goods out of the factory gates. If that steady state remains in place, a capacity shortage of some 15% below what it would have been if port productivity were at its pre-pandemic levels would continue throughout this year, falling to 7% in 2023. “We expect supply chain issues will start unwinding in 2023 after extending the horizon,” he said. “We note some carriers have said port congestion will start to improve in the second half of 2022, but none has said exactly when it will end. In our view the most likely timeline is some time in the first half of 2023, so that means at least another 12 months of lengthy delays and high freight rates, although we do expect to see gradual improvements beforehand.”