Global supply chains have faced significant disruptions due to COVID-19 and related restrictions, leading to predictions of a shift towards less globalized commerce and increased manufacturing in developed economies. Despite some reshoring, the demand for ocean freight container shipping has surged, reaching record levels in May 2024.
Record High Demand for Ocean Freight
According to Norway-based shipping consulting firm Xeneta AS, the demand for ocean freight container shipping hit an all-time high in May 2024, with 15.9 million TEUs (20-foot-equivalent-unit containers) shipped globally. Contrary to earlier expectations of a buyer’s market, the ocean freight sector has been busier than anticipated.
Increased Traffic and Capacity Issues
The rise in container shipping traffic is partly due to longer, multi-leg journeys required for containers that could previously be shipped directly. Xeneta highlights that the chaos in 2024 is centered around capacity, with container ships diverting around the Cape of Good Hope instead of transiting the Red Sea, necessitating more shipping capacity to transport the same number of containers.
Impact of Red Sea Attacks
Ongoing attacks in the Red Sea have further complicated shipping routes. Xeneta reports that in the first four months of 2024, each container was transported 9.3 percent farther on average, resulting in an 18.3 percent global increase in TEU miles.
Growth in Container Movement
In addition to increased sailing distances, the number of containers being moved has also grown in 2024. Xeneta’s report indicates an 8.2 percent growth in container movement during the first four months of 2024 compared to the same period in 2023.
Impact on Shipping Rates
Recyclers who ship materials as a backhaul might find some relief in their rates. Average spot rates on major routes like China to the U.S. have soared, now over 300 percent higher compared to December of last year. However, not all trades have seen rate increases, with some backhaul and secondary trades experiencing flat or declining rates.
Challenges for Container Shippers
Germany-based Container xChange reports that container shippers from China and Vietnam are facing significant rate increases. CEO Christian Roeloffs notes that while a peak in rates might be followed by a reduction due to easing congestion and reduced demand, ongoing conflicts in the Middle East and potential new disruptions, such as labor strikes, could prolong these challenges.
Shortage of Empty Containers in North America
A shortage of empty containers is anticipated in North America, partly because Asian shippers prefer to bring back empty containers immediately. Tony Yu of Baiscon Shipping Line Hong Kong Co. Ltd. predicts this will drive up container prices. In response, some container sellers in North America are holding onto inventory in anticipation of higher prices, while some buyers delay purchases expecting prices to drop.
Conclusion
The global supply chain landscape in 2024 remains dynamic and unpredictable, with increased shipping distances, capacity issues, and fluctuating rates shaping the market. The ongoing challenges highlight the need for adaptability and strategic planning in the shipping industry.
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Source: Recycling Today
