The water transportation industry is arguably one of the most complex transportation industries. It involves many parties—such as carriers, ports, tug operators, and freight forwarders—that all need to cooperate for the whole supply chain to function. This complexity makes the water transportation industry fairly fragile. Any disruption to a link in the supply chain causes knock-on effects down the line. This became especially apparent during the COVID-19 pandemic and the blockage of the Suez Canal in March 2021.
Impact of COVID-19 on sea freight transportThe COVID-19 pandemic affected many industries, and the maritime freight transport industry was no exception. Shortly after the global COVID-19 pandemic broke out, many expected the fear of economic recession would cause maritime trade to decrease. However, as more people were being forced to stay at home due to lockdowns, the demand for consumer electronics—such as televisions, gaming consoles, laptops, and monitors—spiked. Since these goods mainly originate in Asia and are transported to Western markets by container ships, this growing demand for consumer goods led to an increase in container trade.
However, container carriers could not increase their capacity fast enough to meet the demand for shipping, resulting in a drastic increase in freight rates. Between the start of the pandemic in March 2020 and September 2021, when freight rates reached their peak, the price for shipping a 40' container increased nearly seven-fold, surpassing 10,000 U.S. dollars. Thanks to various measures aimed at increasing shipping capacity and improving its utilization, freight rates finally stopped rising at the beginning of 2022. The trend even reversed: since February 2022, freight rates have been steeply falling. As of November 2022, the container shipping price stood at 2,400 U.S. dollars, just a few hundred U.S. dollars more than at the start of 2020.
Despite this fall in freight rates, shipping companies have been making record profits. The largest container carriers reported operating profit margins of over 56 percent in the second quartal of 2022, up from 8.5 percent in the second quartal of 2020.