Industry Update – January 2024
Spot Rates and Fees Set to Climb as Carriers Respond to Panama Canal and Suez Disruption
Disruption in the Red Sea and Suez Canal remains a problem causing supply chain delay and a sharp increase in spot rates. Carriers continue to announce new vessel re-routes via the Cape of Good Hope. Maersk CEO has indicated he “expects related shipping disruption to last at least a few months”. Industry sources seem to agree that shippers should plan for extended disruption. Drone and missile attacks from Houthi-controlled regions in Yemen on vessels in transit through the southern Red Sea continue to disrupt shipping traffic. In an abundance of caution, carriers that normally transit the Suez Canal have announced they will re-route those vessels via the Cape of Good Hope. This costly routing change has led to an additional fees and an increase in spot rates.
Diversion via the Cape of Good Hope will typically add 10 to 14 days to transit times compared to using the Suez Canal. US East Coast import volumes are constricting because the all-water routes have been impacted by ongoing challenges facing the Panama and Suez Canals. Additionally, citing a widening equipment imbalance, some spot rates have risen 61% over the past two weeks. The approach of Chinese New Year, may further increase spot rates from Asia to the US through February.
Secondary affects for shippers to be aware of
Insurance sources indicate war risk premiums for shipments through the Red Sea are also rising. Exports from China to Europe are under increasing strain as well as imports to the US East Coast. Many factories in China work with very small margins and rely on high volume to ensure profitability. Some suppliers are delaying shipment of ‘low-value’ goods in favor of shipments with higher margins. Delays caused by vessel re-routing create an imbalance in container availability. We are monitoring reports of increasing equipment shortages in main China ports. A prolonged disruption of Suez vessel traffic will mean the cost of goods from Asia to Europe will be significantly higher. Finally, we are seeing some indications the demand for air freight from Asia to Europe has increased as retailers and automotive companies pivot to protect their supply chain.
Now more than ever supply chain visibility can be a crucial part of navigating disruption. Tools like TrakIt can help. We continue to strongly encourage importers to:
- Book shipments in advance whenever possible.
- Build in flexibility to your timelines for shipments impacted by carrier scheduling changes.
- Maintain close communication with your origin suppliers.
LOGISTEED America, Inc. will monitor and provide operational updates as new information becomes available. We would like to ensure our clients of our continued support. As always, should you have questions regarding your shipments do not hesitate to contact our Customer Service team.