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Global shipping industry faces' tough challenges' in 2024
Jan 15, 2024|
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Recent hostilities in the Red Sea have put shippers of the world's vital cargo in a bind - but that's not the only problem facing big shippers as 2024 dawns.
Giants like Maersk say the shipping industry, which handles 90 percent of global trade, faces the potential for major disruptions, from ongoing wars to droughts affecting key routes like the Panama Canal.
Complex schedules for large container ships, oil tankers and other commodity carriers may not be coordinated throughout the year.
This will increase delays and costs for retailers such as Walmart and Ikea as well as Amazon, as well as food manufacturers such as Nestle and grocers such as Lidl.
Jay Forman, chief executive of Simple Fun, a Florida-based toy company, said: "This seems to be the new normal - these waves of chaos seem to come and go. Before you get back to some level of normalcy,
there are other abnormal events." The company ships toys from factories in China to Europe and the United States.
Other risks for 2024 include the potential expansion of Red Sea attacks into the Arabian Gulf, which could affect oil shipments, said Peter Sand, principal analyst at cargo data provider Xeneta.
Russia's war in Ukraine has continued to affect food trade since it launched an invasion of neighboring Ukraine in 2022.
On Jan. 5, Maersk joined other major shipping companies in diverting ships from the Red Sea to avoid missile and drone attacks in an area that provides a shortcut to the vital Suez Canal.
The route carries more than 10% of the world's maritime cargo and nearly a third of global containerized trade.
While tankers carrying oil and fuel to Europe continue to pass through the Canal, most container ships reran their cargo routes around the southern tip of Africa.
The move comes after Houthi forces in Yemen launched attacks in the Red Sea. The Houthis said it was support for the Palestinian militant group Hamas, which is fighting Israel in Gaza.
The Houthis said in December that they would target all ships bound for Israel, regardless of nationality.
Spot rates on the Asia-Europe route have more than doubled from the 2023 average to $3,500 per 12-metre container, as bypassing the Suez Canal adds as much as $2m to the cost of fuel for a single round trip.
And those increased costs could translate into higher prices for consumers.
Still, Goldman Sachs said Jan. 5 that the inflation shock shouldn't be as severe as it was during the 2020 to 2022 pandemic.
"It's going to be a bit of a crazy first quarter for everyone's account" on the cost front, said Alan Bell, chief executive of OL Shipping USA.
According to Project 44, an American supply-chain software provider, traffic through the Panama Canal is down 33 percent because of lower water levels. Those restrictions led to a sharp rise in the cost of
transporting dry bulk commodities such as wheat, soyabeans, iron ore, coal and fertiliser at the end of 2023.
Moreover, the increasing frequency of severe weather events has a more direct impact than political tensions. Brazil was hit by a double whammy: a historic drought in the Amazon and excessive rainfall in the
north of the country led to longer than usual queues at the port of Baranagua in late 2023, just months before the peak soyabeans season.
"You can say, 'This is a one-off event,' but one-off events are no longer one-off events if they happen every other month," said John Cazonas, a partner at Breakwave Consulting.
