Containers: Lockdown easing lifts risk appetite, but end-demand may turn sour.

We believe the post-Shanghai lockdown pent up demand and supply shocks will likely sustain the spot market in the next two months. However, there will likely be headwinds from export disruption, global inflationary pressure and the Russia-Ukraine conflict, in our view. While the near-term supply-demand dynamics remain robust, we turn less positive on the risk of softening trade outlook. We expect freight rates to rebound to pre-lockdown levels, but they could reach a peak in 3Q22, if demand falls. That said, our bear case scenario suggests that 2022E earnings could decline 4%, if volume falls 10% YoY in 4Q22 (largely back to 4Q19 levels) but freight rates remain elevated on contracts.