In the tumultuous sea of global shipping, operators are still facing economic instability and severe uncertainty for 2024.
According to an analysis made by logistics company MTM Logix, as the unsatisfactory results for the end of 2023 come to light, the first quarter of this year is expected to see a significant increase of investor demands for arrangement of vessel capacity, and this could push freight rates upwards. This increase is expected to vary between 5% and 10% over the year.
“In the first three months of this year, the challenge will be the availability of containers, which should be the main pressure point for growing rates. An increase in demand of around 9.3% is estimated against a transport capacity of 2.2%,” says Mario Veraldo, CEO of MTM Logix.
The shortage of containers and reduction in ship capacity is a direct consequence of the extended travel times due to restrictions in the Red Sea and Suez Canal, caused by the attacks on container ships by Houthi rebels. Shipping lines have faced circumstantial challenges, and are forced to route around Africa, substantially extending transit times, and this routing not only impacts the efficiency of ship operations, but also disrupts the availability and repositioning of containers. The altered shipping paths have led to an extension of container repositioning routes by an additional 15 to 20 days. This disruption in the supply chain amplifies the shortage of containers, creating a challenging scenario for global shipping logistics.
Also, according to Veraldo, the maritime transportation sector is already dealing with rate increases, as some lines are pushing for a significant rise. Other factors that could also have a direct impact on the increase in tariff prices over the year are fuel surcharges; congestion and additional ports; the United States limiting Chinese access to some technologies, hardening the rhetoric of a “new cold war”; as well as the consequences of decarbonization (scrapping, slow steaming, Iddle fleet, etc).
If these conflicts and restrictions persist, a change in service standards will be seen. Sectors dealing with bulk goods, consumer products and electronics are likely to be the most affected. “However, making definitive predictions at this stage remains a challenge, we need to wait for more signs from the geopolitical scenario, which is evolving,” says Veraldo.
This instability in tariffs also has an impact on all consumers, since these values must be passed on and cause price increases in food, fuel, clothing, medicines and other basic items for society.
“Controlling inflation is beyond the realm of logistics companies, so we have to focus on strategies, and these include flexible contract negotiations with a combination of fixed and floating freight rates, diversification of supply chains, reorientation to where there is more capacity available after Chinese New Year and the use of control tower technology for efficient route planning and reaction,” Veraldo concludes.