As the climate disruption in Panama and the spread of the Middle East conflict restricts the flow of trade from both the Pacific and Asia to Europe, service rates are expected to increase sharply on both routes.
Panama Canal disruption is caused by low water levels due to the lack of rainfall caused by El Nino and climate change, restricting transits by a third to just 24 a day. Some vessels on the Pacific have shifted operations via the Suez Canal to reach the US east coast, only to find Houthi missiles also blocking this route.
Large-scale deliveries of new buildings meant that carrying capacity was not at risk, but diverting 3.4 million TEUs around the African Cape, some 12% of global capacity, would delay vessels, wreck scheduling, and cause congestion at ports.
Industry analyst Jon Monroe believes vessel operators will manage capacity to drive rate levels upwards. “Ocean carriers are expected to tighten capacity using blank sailings to create a backlog of containers that will take them through the April-May period while they negotiate better contract rates,” he said.
Pointing out that carriers that are returning freight bound for the eastern seaboard of the US to west coast ports, Monroe sees this as an opportunity for carriers to “consider the opportunity” presented by the landbridge transit.
Additionally, volumes were forecast to rise 6.6% in December, but instead, import containers ballooned to 11% as sales also saw an increase, prompting Monroe to forecast a surge in orders as diminishing inventories need replenishing.
In Europe, the effect of the Red Sea crisis is already having a major impact on rates. One European forwarder told Container News rates will likely rise from the current US$4-5,000/FEU level to US$12,000/FEU by February, with space on the Asia to Europe vessels in January already constrained and new bookings now being taken only for February departures.
CMA CGM has announced peak season surcharges (PSS) on a number of routes of US$500/TEU on its Asia to North Europe, applicable since 1 January and taking Mediterranean rates to US$3,650/20ft dry box and US$6,300/FEU or for reefer cargo, all applicable from 15 January.
The indications are that these rates will stick, as the impact of the Houthi actions is expected to last, while European retailers are warning that prices are set to rise again.
Analysts are therefore forecasting extended supply chains, longer delivery times, elevated rates, and port congestion in what appears to be a re-run of Covid disruptions.
For more information: container-news.com