How supply chain chaos and sky-high costs could last until 2023

Supply chain woes and port congestion are now getting attention at the central-bank level, given their effects on inflation. Federal Reserve Chairman Jerome Powell recently lamented, “It is frustrating to see the bottlenecks and supply chain problems not getting better. In fact … [they are] apparently getting worse.”

Powell foresees supply chain woes “continuing into next year, probably, and holding up inflation longer than we thought.”

But could shipping logjams last even longer, into 2023, propping up inflation even longer than central bankers expect?

Industry experts speaking to American Shipper, as well as other market players and analysts, are increasingly talking about a scenario in which high ocean shipping costs and congestion could persist throughout next year, if not into the following year.

Timing the top: A guessing game

The Golden Week holiday is now underway in China. At this time in 2020, some market watchers expected spot ocean freight rates to peak just after Golden Week, then fall back. Asia-West Coast spot rates, as measured by Drewry, are triple what they were when those predictions were made, despite a recent dip.

“Timing the top” predictions have slid from Golden Week 2020 to year-end 2020 to Chinese Lunar New Year 2021 to midyear to year-end 2021 to sometime past Lunar New Year 2022. Liner companies have persistently proven far too conservative in their forecasts. Maersk has upgraded its guidance three times this year; current 2021 earnings guidance is more than twice initial expectations.

Timing the market peak appears to be little more than a guessing game amid the unchartered territory of the COVID outbreak and massive fiscal stimulus. As Maersk CEO Soren Skou put it back in February, “Who knows what happens when you get out of a pandemic? I don’t think any of us alive have been in this situation before.”

‘Whole of 2022 may be another peak season’

Nerijus Poskus, vice president of global ocean at digital freight forwarder Flexport, told American Shipper, “We have been in a never-ending peak season. In my opinion, peak season is when there is less supply than demand and there is a backlog building somewhere. And I think we have been in it ever since COVID hit.

“I would say that the shippers that don’t have enough inventory at this time are going to sell out prior to Christmas because of all of the delays,” Poskus said, adding that the current lead time for cargo from Asia to inland U.S. points using non-premium ocean and rail can now be over 100 days.

“I think this chaos will last well into 2022. [Shippers] should expect that the whole of 2022 may be another peak season,” he said, adding, “Importers should expect the spot market to remain high for 2022.”

Container-equipment lessor Textainer (NYSE: TGH) recently held meetings with investors and analysts. The ocean carriers are Textainer’s customers. According to a report from investment bank KBW, “TGH’s customers are saying the congestion is worse than what they were expecting.” KBW quoted Textainer CEO Olivier Ghesquire as stating that “shipping-line customers expect the market to stay intense through 2022.”

Last month, Deutsche Bank analyst Andy Chu predicted that ocean-carrier earnings would actually be h