Container rate surge trending higher and longer: HSBC

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HSBC Global Research reports that container spot rates continue to trend higher and are tracking its ‘bull-case scenario’ for the sector, helped by the ongoing supply chain congestion and robust consumption demand.

The SCFI (Shanghai Export Container Freight Index) has risen for 18 consecutive weeks and is up 30% q-o-q. Despite recent announcements by Hapag Lloyd and CMA CGM to halt spot freight rate increases until February 2022, HSBC cautions that due to congestion amid the peak season, freight rates could remain at elevated levels.

In fact, congestion at US West Coast ports has worsened with the number of ships at anchor reaching peak levels year to date. Maersk said it is taking the opportunity to sign more long-term contracts but even with spot rates plateauing, HSBC “does not expect capitulation of realised freight rates and, thus, believes Maersk could lock in contracts at much higher rates for 2022”.

Other catalysts are yet to be priced in, it adds, saying “In the short term, we expect stronger 2H21 earnings, driven by ongoing congestion and higher freight rates.

“In the medium term, we believe contract rates will roll over at much higher-than-expected levels should spot rates remain elevated for the rest of 2021. ILWU labour union negotiations at the US West Coast ports from mid-2022 could create more disruptions to the global supply chain and, thus, prevent freight rates from falling in 2022.”

As result, HSBC anticipates “further consensus upgrades given the market’s growing strength, which could drive further share price outperformance.”