2021 January Market Update

2021 has begun with a bang as opposed to a whimper, in more ways than one.

We started the year with considerable increases in freight rates from the Far East – the usual costs of around $2,000…

“…. shippers have told “The Loadstar” that Asia-North Europe carriers are now asking for up to $16,000 per 40ft to guarantee shipment in the second half of January.”

(https://theloadstar.com/no-happy-new-year-for-shippers-as-rates-on-major-tradelanes-stay-sky-high/)

This is mainly due to the imbalance of containers coming in and out of China and the resultant shortage of the right containers in the right place at the right time.

Companies have been delaying shipments, hoping freight prices will begin to come down after the Chinese New Year when there are traditional breaks in production, but there have been reports that this may not happen in the same way as previous years.

The UK Financial Times reported this story in a small article, their thoughts where, that prices were going to begin to come down after the Chinese New Year and they mentioned backlogs from issues in 2010, that were cleared by February that year.

They also believe that higher shipping costs could get baked into annual contracts and that this could mean prices may not come down to previous levels and the recent alliances of major shipping fleets also mean competition has been dulled, further hampering prices changing.

The FT also touched on shares in Maersk that have tripled since a 2019 low; the markets are very aware of the value of these companies moving forward – it’s one to keep an eye on.

We believe that prices will have to come back down, as market forces mean that many goods will not be viable at high shipping costs and this means long term the demand will fall, pushing prices back down. And as lockdowns end, shopping trends will move back to normality, which will also force prices down.

We also see increased journey times of 50 – 60 days to EU ports, due to port congestion at hub ports like Singapore.

In the Philippines ongoing delay in the production of about 30 to 45 days, for desiccated coconut is being hampered by the reduction harvest levels (which is usual for this time of year) – with December shipments running into February, and the delays for VCO considerably greater.

Positions are now sold well into Q2, and with stocks in EU and UK warehouses already depleted in 2020, raw material prices are also on the rise right now as people are hunting for deliveries.

There are some hopes that things will begin to settle down by mid Q2 with prices down for shipping and raw materials, but there are no guarantees as we know from 2020.