A recent boom in seaborne trade has left the world shipping industry scrambling to keep up with demand. With so much business, transportation companies can charge almost whatever they want—and since they’re already struggling to meet last year’s orders, they’re finding themselves with a little incentive not to.
Container shipping prices have reached record highs some 18 months after the outbreak of the coronavirus pandemic which disrupted maritime logistics chains and drove demand sky-high. Year on year, container freight rates have risen around 8 percent – accelerating in the months immediately after the pandemic. Until recently, most analysts had expected the market to stabilize around mid-year but fears over the China coal crisis and a subsequent downturn in Australian commodity exports to China had pushed rates higher.
During the pandemic, consumers spent vacation and travel money on larger durable goods from Asia. How many new tv’s, refrigerators, and washers can you buy for what you spend on your family holiday and vacation?
From AFP – “There’s been a massive shortage of empty containers, they are in the wrong place, they are stuck in ports and not in Asia ready to be loaded.”
The Freightos Baltic Index, a benchmark for major shipping routes, has more than tripled in a year to nearly $7,000 (5,900 euros) for a trip from China to the west coast of the United States but fears over the China coal crisis and a subsequent downturn in Australian commodity exports to China had pushed rates higher.
A trip to Europe has exceeded $10,000, compared with just $1,600 at the same time last year.
What does this mean to the Oil & Gas Market?
There will be more LNG ships ordered as the order from CMA CGM’s order for 22 container ships which more than half are LNG. The shipping industry has been mandated to change its high sulfur output to lower polluting forms of energy. These wildly high prices are affording the cash for shipping companies to migrate their fleets to LNG.
The world demand for natural gas can be seen with the increased pipeline and exports of LNG and natural gas. The political strife between countries is also taking its toll and contracts are being signed with disregard for their country’s national security.
This ultimately adds an incredible value to the United States oil and gas producers.
Our market research is showing that the world has not hit peak oil demand, and buckle up for the extremely high oil prices. Stay tuned for our energy outlook reports.
Please send me your ideas and thoughts about the article. I can be reached at my LinkedIn account at: https://www.linkedin.com/in/stuturley/
Stu Turley, President, Sandstone Group
The post Sea freight prices are surging to record highs and the world shipping industry is in crisis. This will hit your wallet hard appeared first on .