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Global Shipping Faces Challenges Heading into Second Half of 2024

by Daisy D.
07/03/2024
in Logistics & Transportation

The container shipping industry and its global transport network are gearing up for the peak demand season, traditionally a time of heightened activity. However, concerns over supply constraints are casting a shadow over this year’s outlook.

Recent diversions of vessels in the Red Sea and persistent port congestion have absorbed any surplus capacity that remained after the disruptions caused by Houthi attacks intensified towards the end of 2023. Spot container rates have doubled since early May, reflecting the tightening supply situation.

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In Singapore, a pivotal hub for cargo between Asia and the West, delayed shipments surged 44% year-on-year in May and continued to rise through June 25th, up 27% compared to the previous year, according to data from FourKites, a supply chain visibility platform.

Mike DeAngelis, head of international ocean solutions at FourKites, highlighted ongoing concerns about the availability of empty shipping containers in key export markets, attributing delays to a global mix of logistical challenges.

Adding to the complexity are preemptive measures driven by residual pandemic uncertainties, such as anticipated US tariffs on Chinese imports and potential labor strikes at East and Gulf coast ports, prompting earlier-than-usual order placements.

Judah Levine, head of research at Freightos, cautioned that the industry should brace for continued pressures in the coming months. He noted projections that spot container rates from Asia to Europe and the US could rise to $10,000 per 40-foot equivalent unit, up from current levels of $7,000 to $8,000. While acknowledging the potential for rates to approach pre-pandemic highs under extreme conditions, Levine suggested that sustained peaks similar to those seen during the height of the pandemic were less likely this time.

Three Scenarios for the Second Half of 2024

Levine outlined three potential scenarios:

  1. Worst Case: Continued avoidance of the Red Sea, sustained peak-season demand, prolonged port congestion, and potential labor strikes in the US could push container rates to record highs reminiscent of the pandemic era.
  2. Best Case: Resolution of Red Sea disruptions could restore optimal sailing schedules, leading to a rapid drop in cargo rates as supply surpasses demand. The introduction of new vessels could further stabilize rates around pre-pandemic levels.
  3. Most Likely Case: Current demand strength may soften as early orders are fulfilled ahead of anticipated trade tensions and logistical challenges. Spot rates are expected to peak in the short term before easing later in the year.

In summary, while challenges persist, the shipping industry is navigating a dynamic landscape shaped by global geopolitical tensions and logistical intricacies.

— Brendan Murray in London

For more insights on trade, supply chains, and shipping, visit Bloomberg.com.

Charted Territory

US Factory Activity and Price Movements

US factory activity showed slight contraction for the third consecutive month in June, with a modest decline in prices, according to the latest data from the Institute for Supply Management. Despite this, there was a notable uptick in new orders, suggesting some resilience amid ongoing economic adjustments.

#GlobalShippingChallenges#ShippingLogistics2024#PortCongestion#ContainerRates#SupplyChainIssues
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