Container Shipping Challenges in 2024: Navigating Risks and Ensuring Reliability

Despite the resolution of the supply chain crisis, U.S. importers face a myriad of challenges in 2024, with the Panama Canal and the Bab-el-Mandeb Strait becoming critical points of concern. Financial pressures on container lines are leading to increased cancellations of vessel sailings, while the threat of a dockworkers' union strike in October looms over East and Gulf Coast ports. Though freight rates remain low, worries persist about potential delays in import shipments.

In an interview with Nerijus Poskus, Global Director of Ocean Procurement at Flexport, to discuss disruption risks and strategies for US importers in the year ahead.

Realated posts:

👉 Pressure on global shipping is seen in the second half of 2024

👉 The Gulf Coast ports recorded a variety of shipments in April

👉 A sudden container bottleneck raises maritime freight rates, triggering global trade worries

Panama Canal Woes

The Panama Canal crisis is intensifying, prompting global alliances to shift services from the Panama Canal to the Suez Canal. This shift, while adding approximately seven days to transit times, raises questions about the Panama Canal's ability to retain market share, especially with the imposition of surcharges. Some importers may opt for the Suez route despite longer transit times due to the absence of surcharges. Poskus predicts a temporary resurgence of the West Coast's market share in 2024, anticipating a shift back to the East and Gulf Coasts in the long term.+

👉 Read more: Panama Canal - A Great Project That Changes the Landscape of Traffic and Maritime Transport

ILA Strike Threat and Security Concerns

The International Longshoremen’s Association (ILA) has issued a strike warning for October 1, 2024. Importers are already concerned about potential disruptions, and Poskus emphasizes the significance of even a brief port closure causing significant disruptions. Additionally, security threats in the Red Sea, including attacks on ships, raise questions about the safety of the Suez route.

Suez Canal versus Cape of Good Hope

Security issues in the Suez Canal, including attacks by Yemen’s Houthi militia, may force some container ships to take the longer route around Africa’s Cape of Good Hope. Poskus notes that this scenario could result in a capacity crunch and increased freight rates, impacting not only trans-Pacific services but also the entire Asia-Europe trade.

👉 Read more: The truth about the Suez Canal and its significance in global maritime transportation

Risks from Canceled Sailings

While the consensus suggests weak freight rates through 2024, Poskus warns that unexpected events, termed "Black Swan" events, could lead to significant rate increases. With the current trend of blank sailings, delays are anticipated to worsen in 2024. Some shipping lines, like Zim, are introducing premium services to meet importers' demand for stability.

Spot versus Contracts

Poskus expects container shipping to exhibit a mixed response, with a potential shift toward spot markets due to increased blank sailings. However, he notes that fixed-rate contracts may still be viable, especially with peak season surcharges allowing carriers to adjust rates if the market recovers.

Mitigating 2024 Risks

Importers are advised to consider premium services to ensure stability amid disruptions. Additionally, Poskus recommends a significant portion of volume on the spot market or index-linked contracts, providing flexibility and optionality. Shippers should closely monitor market dynamics, security concerns, and geopolitical shifts, while diversifying routes and considering Southeast Asia and India as alternative sourcing regions to mitigate risks associated with China.