As the climate disruption in Panama and the spread of the Middle East conflict restricts the flow of trade on both the Pacific and Asia to Europe services rates are expected to sharply increase on both routes, says an article published on a container news website.
Summary
- Climate disruption in Panama and the Middle East conflict are restricting trade routes, leading to a 33% reduction in transits through the Panama Canal and causing vessels on the Pacific to shift operations via the Suez Canal.
- The diversion of 3.4 million TEUs around the African Cape is anticipated to cause delays, scheduling disruptions, and port congestion, driving up shipping prices.
- Some carriers are rerouting freight bound for the eastern seaboard of the US to west coast ports, presenting an opportunity for carriers to consider the landbridge transit.
- Import container volumes rose unexpectedly to 11% in December, prompting forecasts of a surge in orders as inventories need replenishing.
- Analysts anticipate extended supply chains, longer delivery times, elevated rates, and port congestion, reminiscent of disruptions experienced during the Covid-19 pandemic.
Panama Canal Disruption And Middle East Conflict Impact Trade Routes
Recent climate disruption in Panama, characterized by low water levels due to El Nino and climate change-induced lack of rainfall, has restricted transits through the Panama Canal, leading to a 33% reduction to just 24 transits per day. Simultaneously, the Middle East conflict is affecting trade routes between Asia and Europe, causing vessels on the Pacific to shift operations via the Suez Canal, only to face blockades by Houthi missiles.
Global Shipping Rates Expected To Surge
While large-scale deliveries of newbuildings ensure overall carrying capacity is not at risk, the diversion of 3.4 million TEUs around the African Cape, constituting 12% of global capacity, is anticipated to cause delays, scheduling disruptions, and port congestion. Analysts predict that vessel operators will strategically tighten capacity through blank sailings, creating a backlog of containers to negotiate better contract rates and drive up shipping prices.
Landbridge Transit And Market Opportunities
Some carriers are rerouting freight bound for the eastern seaboard of the US to west coast ports, presenting an opportunity for carriers to consider the landbridge transit. Analyst Jon Monroe suggests that managing capacity and utilizing this strategy could lead to increased rate levels.
Surge In Orders And Peak Season Surcharges
December saw import container volumes rise unexpectedly to 11%, prompting forecasts of a surge in orders as inventories need replenishing. In Europe, the Red Sea crisis has already impacted shipping rates, with predictions of rates rising from the current US$4-5,000/FEU to US$12,000/FEU by February. CMA CGM has implemented peak season surcharges on various routes, indicating a trend of rising rates.
Extended Supply Chains And Port Congestion
Analysts anticipate extended supply chains, longer delivery times, elevated rates, and port congestion, reminiscent of disruptions experienced during the Covid-19 pandemic. The Red Sea crisis is expected to have a lasting impact, leading to increased rates and warnings from European retailers about rising prices.
Opportunity For Trade Remodeling And Excess Capacity
Dynamar analyst Darron Wadey suggests that if Cape of Good Hope diversions become more structural, it could provide an opportunity for remodeling Asia, North Europe, Mediterranean, and West Africa trades. However, Wadey acknowledges that unlike the pandemic crisis, there is a significant fall in demand, and excess capacity resulting from vessel orders over the past three years may influence the industry dynamics.
Mitigating Effects Through Operational Adjustments
Wadey emphasizes that any increase in rates should reflect the rise in operating costs. Diversions around Africa may impact Mediterranean dedicated loops, potentially requiring additional ships. Mitigation strategies could involve turning ships around at the Straits of Gibraltar and feedering freight to address operational challenges.
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Source: Container News
