Shippers importing containers from Asia to the US have been faced with record high rate levels and severe congestion leading to supply chain disruptions for the last 18 months. Back in September, industry experts predicted the market would soften after Chinese New Year 2022.
Unfortunately, those predictions are not coming true. It now appears evident that the first two quarters of 2022 are going to be more of the same or even worse than 2021. Rates remain at record high levels. Congestion is as bad as it has ever been while supply chains across the US remain in chaos.
The next chance for any softening in the market is the second half of 2022. There are mixed opinions on how the second half of the year will play out. Several carrier executives believe 2022 will be a complete repeat of 2021. They believe import volumes will remain strong for the entire year creating the identical supply chain issues that hampered shippers in 2021.
Conversely, there are trade analysts predicting a slow down for the second half of 2022. If that occurs, congestion issues should gradually improve to pre-pandemic levels. A major reason cited for the projected slow down is how consumers are starting to spend their money. Analysts believe consumer spending habits will return to pre-pandemic levels, which in turn reduces the demand for manufactured goods.
What does all this mean for container rates? Freight rates are projected to remain at inflated levels for all of 2022. Is it possible that the open market rates will be lower than the 2021 levels should the market soften? That is a reasonable expectation. However, there is no scenario where 2022 rate levels will approach pre-pandemic levels. Shippers hoping that rates will gradually return to 2019 levels are going to be disappointed. The carriers are way too powerful and have mechanisms in place to prevent future potential rate wars.