Page 4 - Al-Rashed Newsletter March 2021

POTPOURRI
2021 CONTAINER SHIPPING OUTLOOK

The industry is enjoying a boom phase, with global container freight rate indexes topping $5,000 per 40
foot container in February 2021 after climbing steeply and steadily since May 2020.

The reshaping of the container shipping market that began in 2020 and continues in 2021 bears
implications for every industry stakeholder, as follows:

1. CARRIERS will be challenged to maintain their newfound discipline and hold the line on rates, to
refrain from ordering new vessels, and to firm up their balance sheets so as to move quickly when and
if acquisition opportunities arise. But they should be alert to any preemptive moves by rivals to acquire
new vessels.
2. FORWARDERS, enjoying a run of strong profitability, have a chance to form new long-term
relationships with shippers by strengthening their value propositions—for example, by committing their
own capital in the form of warehouse space to help shippers ride out market dislocations caused by
limited port operations.
3. SHIPPERS have to adapt to a new normal of shipping rates that are higher than those that have
prevailed through most of this century—though not as high as they stand today. Successful adaptation
requires shippers to actively deal with the key drivers of transportation costs: urgency, dimensions,
lead time, and distance. By improving container use, by extending delivery times to some customers,
by stretching lead times for carrier bookings, and by reducing shipping distances, shippers can
mitigate the effects of stratospheric freight costs.
4. INVESTORS, including private-equity sponsors, have an opportunity to ride the container shipping
industry’s rising tide, which is lifting virtually every player in the container shipping ecosystem—except
shippers. Investors should be mindful, though, that competition for the industry’s profit pool will likely
strengthen, and they should avoid overpaying for what are, ultimately, highly contingent earnings
streams.

MARKET SHARE BY ALLIANCE

MR. GOLDY CHADHA
KEY ACCOUNT MANAGER
Source: AlixPartners 2021 Container Shipping Outlook 7