The ongoing hike in global freight rates is expected to remain in the short-term, although a tapering is expected to in the long term as supply chain disruption clears out, Fitch Ratings said.
The rating agency stated while the high freight charges are here to stay, global container shipping companies are benefiting from the increase that resulted from the economic implications stemming from the pandemic.
The high rates will help strengthen their balance sheets and offset the impact from increased investments in new vessels on financial metrics, Fitch Ratings said.
Due to the mismatch between pandemic-induced trade and operational disruptions to the shipping supply chain, globally an increase in demand for container shipping is witnessed.
“We believe that the shipping rates rally has peaked, having roughly quadrupled Year-on-Year (YoY) on the Asia-Europe route and doubled on the Asia-North America route,” the rating agency said.
Fitch Ratings said it anticipates unchanged spot rates in 2Q21 due to a strong economic recovery and a gradual normalise is expected to start only from 2H21.
Nevertheless, 2021 full-year results of container shipping companies are likely to be strong as high spot rates will flow through to contracted rates, while most investments in new vessels will be due after 2021, it added.