THE US supply chain is suffering a "bullwhip effect" after shippers overreacted to last year's congestion and imported too much too soon, and are now stuck with too much inventory, says New York's FreightWaves.
Hapag-Lloyd CEO Rolf Habben Jansen says the shipping world is at risk of an opposite effect. "There is still a lot of volatility in the market, and everybody seems to be doing the same thing, which is quite scary," he said.
"This year we saw lots of people ordering Christmas stuff [for early arrival] in the summer. So, a lot of volume was brought forward. Now we see congestion easing, inventories filling up and warehouses filling up and everybody is cutting orders like crazy. We've gone to the other extreme, said German shipping giant's CEO.
"I'm just waiting for the next step," he said. "Because I'm pretty sure what we're seeing right now is an overreaction - again. People trying to cut everything possible at this stage will see that underlying consumer demand is actually relatively healthy and all of a sudden, they'll become concerned that their inventories are a bit on the low end and we'll possibly see a bounce-back."
Bringing forward Christmas cargoes to the summer left a hole in demand this fall. Spot-rate indexes continue to decline, albeit at a slower pace recently as ocean carriers remove more capacity to balance the market.
Mr Habben Jansen, whose company is the world's fifth largest ocean carrier measured by fleet size, continues to believe that post-Covid rates will ultimately end up higher than pre-Covid rates.
"In the short term, anything is possible," he said. "I think we will see rates above pre-Covid, at that level, and below that level for stretches of weeks or days. What's more important is to look a little bit longer term.
"And in the end, whether we like it or not, costs have gone up quite significantly over the last couple of years. Time-charter rates have gone up and been committed to for longer periods. Terminal costs have gone up. Bunker costs have gone up. That results in a higher unit cost for the industry on average.
"What we've seen in the last 10 years is that rates tend to hover somewhat above the cost level," he continued. Because the future cost level will be higher than the pre-Covid level, Mr Habben Jansen believes that carrier rates in the long term "are going to be significantly above pre-pandemic levels".
The Hapag-Lloyd CEO sees newbuilds as a positive, assuming shipping lines don't descend into a price war when a massive wave of newbuildings hits the water starting next year.
Mr Habben Jansen did not sound particularly worried about all the new ships. "Of course, the orderbook right now is certainly a bit on the high side," he said. "But on the other hand, in the years before 2020, we were underinvesting in this industry and the orderbook was actually too small.
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