The container shipping market has gone through a period of extreme uncertainty and volatility in 2020, and it would only be natural for market participants to be hoping for more stability in 2021. 

The carriers’ success with tactical capacity management during the pandemic outbreaks in early 2020 – also more colloquially known as blank sailings – resulted in the overall global FBX rate index remaining fairly constant in a band between roughly $1300-$1500. However, once the demand boom began followed by increasing bottleneck problems related first to vessels, then equipment, then terminals, and ports, the impact on pricing became unprecedented. In the first month of 2021, we appear to see a plateau just above the $4000 mark. 

In the coming period, all eyes will be on signs as to whether the bottleneck problems are abating and whether the demand boom continues. It is in this phase that everyone should be aware that the normal measurements of both supply and demand growth will temporarily become useless. 

This might sound unduly harsh, but mathematically it is actually correct. The norm in the industry is to measure both demand and supply growth on a year-on-year basis. Under normal circumstances, this is a good way of performing the measurement as it automatically takes seasonal effects into account – although the changing nature of Chinese New Year means that for January and February the industry standard is also to only compare the sum of the two months against prior year to eliminate this effect of a changing date. 

2021 will be very different. 

The issue is simple. Let us take a look at capacity first. During the pandemic peak impact in April and May, some trades saw blank sailings range up to 20-30% of the capacity on offer. As a tangible example, the Asia to North Europe trade had a capacity reduction of 29% compared to their announced schedules in the month of April. But what then happens in April 2021? 

If the carriers deploy no additional capacity in 2021 but also blank no sailings, then in April we would see a 41% year-on-year increase in capacity – simply because the capacity offered in 2021 is now compared with the extremely low capacity offered in 2020. Or if the boom continues and the carriers inject 10% additional capacity, then the year-on-year capacity growth will become 55%. 

We have the same problem in terms of demand. In April of 2020, total European imports declined 20% year-on-year. But this means that if European imports in 2021 simply revert back to the 2019 levels, this will show up in the statistics as a 25% demand growth. And if European import ends up having grown a modest 8% in total over the two years since 2019, this will show up in the 2021 statistics as a growth rate year-on-year of an astonishing 35%. 

Hence the headline of this article: Don’t be fooled by the statistics in the coming months emanating from the container shipping industry. The normal year-on-year growth rates for capacity and demand on both global and trade lane levels will seem extremely high. Not because they are high, but because of the mathematical problems in comparing to the pandemic-induced extremes of 2020. 

When you see extremely high capacity injection, it does not in itself signal overcapacity. When you see extremely high demand growth, it does not in itself signal a major demand boom. 

The good approach to assessing the underlying structural strength of the market is to also compare to 2019 and see to which extend the compounded 2-year growth rate appears well aligned or not.