Container shipping chokepoints threatened; financial strain cancels sailings. Dockworkers union threatens strike; import delays feared. Nerijus Poskus advises on mitigating disruption risks.
Panama Canal Fallout
Poskus notes Panama Canal adds 7-day transit; surcharge prompts Suez preference. Panama’s rising costs led to $300 surcharge, favoring Suez for some. Anticipates West Coast short-term gain in 2024, long-term shift to East/Gulf.
Shift driven by East Coast consumer base and cargo trends. Concerns not just Panama but also Red Sea attacks, ILA contract end. ILA warns Oct 2024 strike; importers anxious about potential impact.
Poskus asserts widespread awareness of potential disruptions, citing Daggett’s stern language. A port shutdown, even for a few days, is anticipated to cause significant disruption.
Route Redirection
Concerns arise over security at Suez due to attacks; some opt for Cape of Good Hope route. Potential escalation threatens container shipping, impacting trans-Pacific and Asia-Europe trade.
Sailing around Africa adds 10-14 days vs. Suez, compounding prior time differences. Carriers might need 30-40% more vessels for weekly services, leading to a possible capacity crunch. West Coast limitations exist; shifting all could overload ports, spike prices.
High prices might push importers to choose longer Cape route over paying surges. Balancing capacity and route options crucial amid escalating threats. The ripple effect could strain global shipping networks significantly.
Reliability Concerns
Canceled sailings pose reliability concerns for importers amid weak freight rates consensus. Importers prioritize service reliability over anticipated low rates due to overcapacity. Poskus notes uncertainty; rates might not collapse with potential Black Swan events.
Continued low rates could mean more sailings canceled, worsening import schedule reliability. Poskus predicts exacerbation of delays in 2024 due to increased blank sailings. Carriers like ZIM introducing premium services to address stability needs despite market conditions. Importers seek stability, willing to pay for reliability amidst disruptions.
Contract Dynamics
Spot market gains favor amid downcycles, diverting from term contracts. Container shipping sees mixed trends; fixed-rate contracts with peak season surcharges offer flexibility. Importers hesitant on contracts above spot rates, anticipating further market decline.
Importers should pivot towards Southeast Asia and India due to shifting volumes. Premium services offer stability amid potential delays in the supply chain. Considering spot market or index-linked contracts provides flexibility and optionality.
Risk Mitigation
Index-linked contracts remove pricing disputes, aligning with market trends. Spot market adaptability allows swift shifts in carriers and routes during disruptions. The ability to pivot during sailings or route changes mitigates unfavorable transit times. Fair pricing ensures access to necessary capacity amid dynamic market shifts.
Did you subscribe to our daily newsletter?
It’s Free! Click here to Subscribe
Source: Freightwaves
