Where is the ocean market heading, and what’s on the horizon for shippers for the remaining months of 2024? Michael Braun and Peter Sand share insights, reports Xeneta.
Key Observations
Falling spot market rates. Rising long-term rates. Narrowing of market spread. Carriers toughening negotiations on long-term rates. Potential strikes in ports from 1 Oct on the US East and Gulf coast.
These were just some of the observations to come out of July’s State of the Market webinar.
As well as expanding on key insights from the 2024 Mid-Year Ocean Market Outlook, hosts Michael Braun and Peter Sand answered the big question, where is the market heading, and what’s on the horizon for shippers for the remaining months of 2024?
Similar Patterns
As Sand noted in the opening segment of the webinar, the Red Sea crisis has been particularly topical during the first seven months of 2024. Not only did it elevate ocean rates at an unprecedented pace, but it has continued to have far-reaching ripple effects spanning ocean, air, and everything in between.
More than this, the Red Sea crisis has undeniable similarities to market conditions during COVID-19.
As Sand explained, “The fundamental cause of the [Red Sea] crisis and the explosion of freight rates, in particular the spot rates and exclusively out of Far East, has led to higher freight spent for shippers, less predictability, poorer service levels and everyone struggling to get their goods across from where they are manufactured to where they are consumed.”
Braun also noted the similarities, pointing to Asia and West Coast Ports to highlight similar patterns of market behavior concerning congestion and carriers driving rates up on long-haul, outbound lanes.
Capacity Conundrum
The smarter way for carriers to deploy capacity right now is, of course, where rates are highest. This is resulting in congestion on main hauls from Asia into Europe, as well as Singapore – the world’s largest transshipment hub, which became an epicenter of port congestion in the Far East for much of Q2 2024.
Front-loading efforts by shippers are also contributing to this Q3 squeeze.
As Sand remarked: “There are tendencies from the demand side also, where far eastern exports are booming and some of the main destinations, in particular in Europe, but also the US, seem to be driven more by either inventory building or shippers trying to avoid a massive squeeze in the third quarter by front-loading cargo.
“We are seeing nominal TEU-demand go up by 2½-4% y-o-y. And while these figures wouldn’t raise the alarm in a ‘normal’ year, once you’ve adjusted for the longer sailing distances, a few percent changes in TEUs can become quite significant double digits in TEU-miles, and it’s that multiplier [longer sailing distances] on the world’s most important trades that’s causing havoc on the market…”
Trade as a political tool
Throughout the session, Braun and Sand brought attention to the political aspects affecting trade, such as the ‘bidding war’ on tariffs on imports from China, potential strikes on the U.S. East Coast, and presidential elections. These factors have a high risk of impacting procurement efforts in the supply chains and necessitate contingency planning for shippers and carriers alike.
The hosts also spoke to the significant changes in alliances, especially the anticipated reorganization involving the Gemini Alliance and MSC. It was highlighted that the implementation of a focused network to enhance service efficiency is crucial for managing potential congestion
Environmental Concerns and Emissions
Despite a general intent to reduce emissions, market realities push against these goals, indicating a complex interplay between operational efficiency and environmental commitments.
Fortunately, the latest data, released by Xeneta and Marine Benchmark, revealed that the CEI is now back under 100 points, a mark that was breached for the first time in Q1 this year. That said, the three long-haul trades most impacted by the conflict in the Red Sea – from the Far East to North Europe, the Mediterranean, and the US East Coast – have seen emissions increase from Q1.
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Source: Xeneta
