The most favorable option includes a rate increase to US$10,000/FEU.

 

The first half of 2024 under no perspective was what was expected, while forecasts made last year pointed to overcapacity and a consequent drop in rates. However, the crisis in the Red Sea, which started in December 2023, turned the pieces of the board upside down, leading shipping lines to correct their projections upwards, while cargo owners are living a déjà vu reminiscent of the worst days of the pandemic. But the start of the second half of the year is a good time to look ahead to the next stage of the year.

Judah Levine, head of research at Freightos, outlines three possible scenarios for the global shipping industry:

 

In the worst-case scenario, ships will continue to avoid the Red Sea, initial peak season demand remains robust and port congestion will persist for months, extending global disruptions beyond the Chinese Lunar New Year, which begins in late January. Couple that with a longshoremen’s strike on the U.S. East and Gulf coasts, and container rates would reach record highs set during the pandemic.

 

Whether the best-case scenario occurs depends on an end to the Houthi attacks in the Red Sea, which would allow shipping lines to resume their normal shipping itineraries. After a few months of adjustments, freight rates would fall sharply as supply outstrips demand, so that new vessels entering the market would put downward pressure on the freight rate for a 40-foot container, bringing it to pre-pandemic levels of around US$1,000 on the Asia- to both U.S. and European coasts.

 

But for Levine there is a more likely scenario, where the current strength in demand softens, which would show that the first orders of the season were brought forward from their usual third and fourth quarter period, due to fears of impending new US tariffs on Chinese imports, delays caused by the Red Sea crisis, concerns over dockworkers’ strikes, or a mix of these three factors. As a result spot rates could still peak at around US$10,000/FEU in July and August, but would come back down later this year.

 

Levine comments that at times the rate environment could match what was experienced during the pandemic, albeit with a shorter time span: “to me, the most likely scenario is that we will see a couple of months where there will be a lot of pressure” and adds that “we may even get to those US$15,000/FEU levels but during the pandemic we had months and months of that. This time I think we could have a few months, but not many.”

 

Maersk CEO Vincent Clerc ratifies the most likely scenario anticipated by Levine by indicating that the next few months will be challenging for both shipping lines and companies as the Red Sea situation already extends into the third quarter of 2024.

 

Clerc, at a recent online event with customers, further indicated that, for the time being, Maersk vessels continue to detour through southern Africa via the Cape of Good Hope in South Africa and acknowledged that the situation is difficult for both shipping lines and companies that need to transport their cargo.

 

He detailed that extending itineraries to travel the longest route around Africa requires two to three ships and indicated that “today, all the ships that can sail and all the ships that were previously not well used in other parts of the world have been redeployed to try to plug the holes. This has alleviated some, but not all of the problem throughout the industry, including Maersk.”

Congestion and container shortages

 

The port of Singapore, the world’s second busiest port and a key cargo transfer hub between Asia and the West, has become a major node in the current disruptions as it recorded a 44% increase in delayed shipments in May from a year earlier, and a 27% year-on-year increase through June 25, according to data from FourKites, a real-time supply chain visibility platform.

 

Mike De Angelis, head of international ocean solutions at FourKites indicated to Bloomberg that the “lack of available empty containers in key export markets is an ongoing concern” and added that “containers are getting caught in a global series of delays.”

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