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After the chaos of the pandemic years, 2023 brought a sense of normalcy and familiar market dynamics. By December, however, the industry was reminded of the fragility of global trade. Low water levels constrained transits at the Panama Canal, and the Suez Canal became virtually impassible by global container carriers due to terrorist attacks. As of this writing, the cargo ship Dali’s March 26 collision with the Key Bridge in Baltimore halted ship traffic at the Port of Baltimore potentially for months, putting pressure on neighboring East Coast ports. Nevertheless, the industry has adjusted remarkably well to these developments. Recent capacity investments by carriers, which were expected to throw the balance of supply and demand in favor of shippers by a significant margin, have proven surprisingly critical to supply chain resilience.
The impacts of geopolitics have been on the industry’s mind for several years now, beginning with the China import tariffs, continuing through the pandemic, and especially since the onset of the Ukraine-Russia war. It is clear now that these risks to global trade are here for the foreseeable future. At the Transpacific Maritime conference in early March, the annual gathering of shipping industry players organized by S&P Global, the prevailing message was one of continued disruption and fragmented supply chains. Between rising global tensions, growing protectionist policies, and black swan events, international trade is changing and facing more risks than ever before.
The coming year brings a variety of uncertainties to shippers trying to plan their networks. The diversions from the Suez Canal are expected to continue until the attacks on commercial vessels cease, meaning longer transit times around Africa for shippers utilizing this route. The more common route from Asia to U.S. East and Gulf Coast ports, the Panama Canal, is running without significant delays inbound, though export transit times are experiencing longer transits than usual; the situation could improve or deteriorate this year, depending on weather at the canal.
Overall, with longer transits around Africa absorbing extra capacity in the market, ocean freight supply is better balanced to the expected demand this year. Ocean carriers expect modest freight rate increases to account for higher operational costs and the supply/demand balance resulting from these disruptions. Rates remain relatively favorable to shippers, with recent highs still far below the extreme peaks reached during the pandemic period. One dynamic to watch in early 2025 is the shifting ocean carrier alliance landscape. The largest carrier, MSC, will be operating on its own. Maersk and Hapag-Lloyd will kick off their new alliance, the Gemini Cooperation, which will feature a hub-and-spoke network. The OCEAN Alliance will continue with its current members, and the remaining existing alliance, THE Alliance, may bring on a new partner or retool its network as well. The overall structure is in a state of flux, and it will be difficult for shippers to plan for changes too far in advance.
On the domestic front, labor contract negotiations covering U.S. East Coast and Gulf Coast ports are underway ahead of a Sept. 30 deadline. There are concerns that these discussions could become contentious and potentially lead to labor slowdowns. If that occurs, or if sufficient concern builds and convinces shippers to shift cargo to avoid potential slowdowns, the U.S. West Coast gateways will feel the pressure of a cargo surge. Further, any deterioration of conditions at the Panama Canal could put similar pressure on West Coast infrastructure.
There are plenty of risks ahead. Most industry experts agree that while the global market is showing significant resilience considering recent developments, any additional major disruption could push the system over the edge and create bottlenecks reminiscent of the pandemic era. Supply chain managers are advised to stay close to information, close to partners, and constantly evaluate contingency plans. Strong partnerships are always a good idea, and they will be more critical than ever as the global trade landscape changes.
Rachel Shames is vice president of pricing and procurement at CV International, a freight forwarder, customs broker and non-vessel-operating common carrier headquartered in Norfolk.