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Congestion is shifting from more visible to less visible regions of the world

Dry bulk and container shipping markets have seen sharp declines in earnings over the summer. Many have pointed to a drop in congestion as the reason. However, congestion persists at high levels, shifting from more visible to less visible regions of the world.

The summer months of 2022 have seen a slow motion collapse in freight rates for both dry bulk carriers and container ships. For the former, the Capesize 54-TCA Index fell from US$38,169 per day on 23 May 2022 to just US$2,505 per day on 31 August 2022 and, for the latter, the Asia to US West Coast box rate slid from US$7,900 per FEU on 16 May 2022 to US$3,959 per FEU on 6 September 2022.

Public companies frequently cite the unravelling of port congestion from pandemic highs as a major contributing factor. Of course, easing congestion releases large numbers of vessels back into the market and quickly expands the available supply of tonnage. But apparently, congestion persists at stubbornly high levels in between flare ups. It just shifts to less visible regions, so should not be blamed for the collapse.

Perhaps the clearest example of congestion shifting between regions has occurred in the United States. Port congestion caught the public imagination early on in the pandemic, when staff absences afflicted Los Angeles/Long Beach on the US West Coast, just as the population was urged to “stay home” and households abruptly switched spending from services to goods.                


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