Containers to Impact MPV Rates Into 2022

Ongoing disruption in the container sector is expected to keep pressure on multipurpose shipments until February at the earliest, potentially pushing any decline in MPV rates forward as far as the third quarter of 2022.

With ports around the world already facing long delays and backlogs, the arrival of Christmas and Chinese New Year promises to drive more disruption for the breakbulk shipping sector as it takes up slack from the container market.

“We are currently seeing constant high demand for the movement of containers, and the pressure will remain high up to the Chinese New Year, which starts on Feb. 1, 2022,” Arnoud Dekkers, commercial director at 4D Supply Chain Consulting, told Breakbulk. “Normally, we see a slowdown of shipments from the end of December to the end of January, as shipments for delivery during the Europe and U.S. Christmas period will have been shipped or will be on the water. However, the demand will now be extended to mid-February 2022, which, of course, will put even more pressure on the MPV market, since there will be a need for MPV support.”


Omicron Poses Challenge

While busy hub ports in Asia, Europe and the U.S. have all reported that efforts are underway to manage delays there appear to be few signs that the disruption is near and end. The arrival of the omicron variant this month has further disrupted forecasts, with the Global Logistics Alliance noting that its arrival “is threatening the global shipping market again” and adding upward pressure on container shipping rates.

Jan Hoffmann, head of trade and logistics at UNCTAD, agrees, calling the latest outbreak "really bad news" and highlights its impact on all supply chains as it drives longer waiting times in ports, going on to notes that “the typical time a container ships spends in port globally is 12 percent longer than before Covid, and the typical container door-to-door is 20 percent longer.”

With the shift of goods from container routes to breakbulk having proven to be a longer term than many in the industry predicted in 2020. the outlook now is difficult to predict. Far from being a temporary blip, this new dynamic has reshaped charter rates and is expected to continue as each new threat extends demand.

“We see goods being unloaded from containers and then loaded as breakbulk just to get them shipped, and we also see an increase in shipments with shippers’ own containers on MPVs. All this then leads to demand on the MPV side [and] our estimates as per the market trend are that we will see a decline in MPV rates at the earliest in Q3 2022,” Dekkers said.


End-to-end Visibility

While sky-high charter rates have been good for many shipping lines, the knock-on effect has in most cases been passed on to manufacturers and consumers. As a result, production output from the second half of the year has lagged demand for many sectors as firms reassess their supply chains.

“While supply chains have been stretched to the limit, there is a lag in the industry catching up, meaning some are still expecting just-in-time delivery,” Dekkers explained. “Due to the current supply chain issues, there is more spending on freight movement and the expectation is for fast and predicable delivery schedule, which is not happening at present … We can only hope that reduced exports during Chinese New Year can help by slowing down the movement of shipments, so that the various ports can unload vessels and return empty containers back to the carriers.”

Ensuring full end-to-end visibility of cargo flows has emerged as a vital differentiator for all participants in the supply chain and this requirement often extends beyond the immediate cargo en route to include macro views on related sectors, Dekkers said this approach is driving clients to think about different modes of transportation and to consider multimodal solutions to avoid hotspots or bottlenecks.

“One example was for shipments from Singapore to Sweden, where we flew part of the goods and moved the rest by rail in order to keep production going at the manufacturing facility in Sweden,” Dekkers said.


Project Cargo Revival

While the current supply chain squeeze for the MPV sector is expected to continue well into next year, the longer-term picture suggests a solid swing back to traditional breakbulk cargoes. For the moment a dearth of newbuild vessels has meant that much of the global fleet is aging but a raft of new orders is expected to start hitting the waves from late 2022 onwards.

“More newbuild MPVs are slowly coming into the market,” Dekkers said. “but at the same time, it needs to be recognized that there is a huge global investment in renewable energy projects and large volumes of wind energy equipment are taking up significant MPV tonnage in the market. This will only continue over the next decade.”

A withdrawal of government stimulus measures, that have propped up many economies over the last two years, is also expected to help reverse the current demand for container spending from 2023 onwards, resulting in a move towards infrastructure spending.

Dekkers considers “the time is right for new investments” in multipurpose shipping, citing global demand for more sustainable and lower-carbon transport solutions as a key factor. “Carriers are currently benefiting from the global supply chain issues with record profits, so the opportunity to invest in new greener tonnage should provide a good return on investment. Hence, the next decade will see more newbuild orders and different types of vessels being developed to support a more sustainable and secure global maritime industry.”