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        Will 2022 Be A Happy New Year?

        Will 2022 Be A Happy New Year?

        The next few months will be a critical determining factor in predicting when the strain on our international supply chain will end. Driven by Covid-19, and fueled by variants like Delta and Omicron, bottlenecks, delays, and labor shortages have persisted.

        Chinese New Year Will Be Less Predictable  

        It’s been an exhausting year for everyone, and the stress is evident. All eyes are on China as they wind down the year with a new outbreak in Xi’an, a city southwest of Beijing and home to 13 million residents. Though the country continues to pursue a ‘zero-Covid’ strategy, a total lockdown has far- reaching implications and would likely mirror some of the challenges observed during the first outbreak in January 2020. 

        As the Chinese New Year observation and celebration approaches (February 1-6), we would anticipate the usual supply chain delays including factory downtime and longer transit times. However, as one would expect, the normally predictable impact on the global freight market is poised to be far more significant this season.  Limited capacity and increased transportation demands will certainly add tension to supply chain woes.  The winter Olympics (Beijing 2022) will begin on the 4th of February and run through February 20, directly coinciding with some New Year festivities. We do expect government travel regulations could result in earlier than normal factory shutdowns– with some even happening as early as next week.

        Shipper Consolidation Creates a Power Shift

        Just 16 companies control 80% of world’s liner shipping, container production and box-leasing capacity.  That’s eight liners, three factory groups and five box lessors. Each year the provider pool becomes smaller with very few incentives to compete on price. According to Alphaliner, Maersk (based in Denmark), MSC (Switzerland), CMA CGM (France), Cosco (China), Hapag-Lloyd (Germany), ONE (Japan), Evergreen (Taiwan) and HMM (South Korea) make up the top 8.

        However, considering Maersk has announced it will only concentrate on its top 200 customers and many carriers are not accepting new customers, significant capacity needs are mainly left to MSC, CMA and COSCO at this time.

        MSC is on a buying spree, acquiring a significant number of secondhand vessels. All larger liner companies are poised to increase their dominance in by 2023. Maersk’s orderbook totals 6% of its on-the-water capacity, CMA CGM’s orders-to-fleet ratio is at 17%, HMM and Cosco 20%, ONE 21%, Hapag-Lloyd 23%, MSC  24%, and Evergreen 48%.

        As the consolidation process gains momentum, so will the associated costs.

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