一位船东朋友撰写的英文版述事

The unexpected surge in COVID cases in the past few days in China had ignited renewed concerns about possible disruption to supply chain that was recuperating from the pre-CNY rush. The widely spreading new Omicron sub-variant had prompted local governments in Shenzhen and Shanghai, the two major export engines, to partly shut down the city, putting a pause on people's work and life. As part of China’s stringent COVID policies, people were advised to stay at home. The inter-city people movement, essential to the logistics industry, was restricted to varying degrees. Luckily, port operations in both cities remain normal now and will be kept so. How to move the containers around the port area, however, was the real challenge, as trucker drivers were constrained by the virus containment measures and some factory warehouses were closed.

The export community was caught by surprise and scrambled to react to the situation. Due to people and container movement restrictions, booking shortfall this week was expected to be in the range of 15-20%. It might be too late for the shipping lines to alter their schedules this week but if the forecast continues to be bleak in the next two weeks, it’s very likely some port omission or void sailings will happen. The extent to which sailing schedule are to be affected hinges upon how long it will take to get the outbreak brought under control. The longer it drags on, the more disruption it willcause to production and shipping plan. Carriers will have no choice but to put in place blank sailings to match dropping demand.

The drop in volume, although not precipitous yet, will further dampen an already lukewarm market after CNY, putting downward pressure on market spot rate. To ensure full vessel utilization, carriers are expected to ease premium rate ratio requirements and turn on the valve of FAK rate space. BCOs will probably be blessed with ample contract rate space. It remains elusive when carriers will start dropping FAK rates. Unless the market really takes a drastic turn for the worse, carriers are reluctant to resort to rate reduction. They are finding themselves in an inescapable conundrum: newly proposed 2022 contract rates by carriers are actually higher than current prevailing market spot rate (namely, FAK rate). The lower market spot rate slides, the less convinced customers are about carrier’s new contract rate proposals.

Yet, as proved time and again during the pandemic, any major disruption in the supply chain will cause unintended consequences and change the course of how the market will transpire. Eventually (say in 2-3 weeks’ time) the new wave of the pandemic will be reined in. Factories start pumping out pent-up orders. Demand will come roaring back and ships will be full again. Space becomes a rare commodity. The market spot rate will regain lost ground in no time. It is déjà vu all over again.