Fitch Ratings warns soaring container rates unsustainable in mid-ter
SOARING global container shipping rates remain high, but are unsustainable, according to New York's Fitch Ratings, reports New Delhi's Times of India.
Fitch attributed rising rates to container box shortages and port congestions due to the Covid crisis that has disrupted supply chains and extended containerships' turn times.
Fitch said the ongoing virus outbreaks in many regions and mobility restrictions are likely to keep freight rates abnormally high in the short term.
Nonetheless, global container shipping companies' performance will be strong in 2021 after a profitable 2020, according to Fitch Ratings.
But Fitch said the current rates are unsustainable in the medium term as the sector is susceptible to rate volatility and risks of weak economic recovery and trade protectionism, requiring constant prudent capacity management.
A combination of rebounding demand for goods in 2H 2020, supply chain disruptions - like container box shortages and port congestion - and more strategic capacity management drove container freight rates up, especially on the routes from China to Europe and the United States.
Shipping a laden FEU from China to Europe or the US west coast now costs over US$8,000 dollars and $4,000 dollars respectively from well below $2,000 dollars a year ago.