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Hapag-Lloyd CEO expects container market congestion to last until third quarter

In the wake of Ever Given blocking the Suez Canal for close to a week, Hapag-Lloyd CEO Rolf Habben Jansen expects the market to experience congestion until the third quarter.

Evergreen's vessel, the Ever Given, blocking the Suez Canal for almost a whole week before being refloated is causing long-term challenges for the container market.

In a briefing Thursday evening, Hapag-Lloyd CEO Rolf Habben Jansen said he expects congestions to remain an issue for the container market until the third quarter.

"We have port congestion in many ports, not only in the US, but also in Europe and to some extent in Asia, where we are simply losing a lot of time, and that means that shipping lines actually currently need significantly more ship capacity to transport the same number of boxes," says Habben Jansen, before adding:

"In simple terms, for every service if you want to continue to offer a weekly service for, you would need one or two ships more, a little bit dependent on whether it goes to the US or whether it goes into Europe. And then of course, we also see the terminal capacity is reduced, because there are labor shortages in many places or Covid-related restrictions."

He furthermore explains that short-term freight rates have spiked due to both market congestion and high demand.

Despite the Ever Given only being stuck for a little less than a week, the blockage of one of the most traveled trade routes at sea, which connects Europe with the Indian and Western Pacific Oceans, will impact Hapag-Lloyd's services longer than the time the ship stood still.

Habben Jansen says the Suez blockage has had major effects on the company's services to and from the Far East to the Mediterranean and from the Far East to North Europe, Transpacific and India. The container company had six ships in the queue, and said that the company was approximately 24-48 hours away from the decision to re-route, had the Ever Given not been refloated.

Balance in supply and demand

Even though the CEO sees congestion lasting until approximately the third quarter in Europe and late second quarter or beginning third quarter in the US, as a best case scenario, he still thinks supply and demand for 2021 and 2022 look good.

"I would say that when you look at 2021 and 2022, the development of supply and demand actually looks fairly balanced. And that also implies that we will return to normalcy when this spike in demand normalizes," says Habben Jansen

On the question of whether he thinks that the abnormal markets might stretch into the fourth quarter, Habben Jansen says:

"I think one of the things we've learned over the last 12 months is that you should never say never. Personally, I neither think or hope so. I think right now that, looking at the underlying demand, the real spike we saw towards the end of the second half of 2020 is probably flattening a bit. We just need to work ourselves out of these congestion-related issues now, and hopefully we can do that over the upcoming couple of months."

This article originally appeared on Shipping Watch

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