Ocean shippers expected to brace for rough seas in 2024 due to war and weather By Reuters
© Reuters. FILE PHOTO: Maersk’s logo is seen on a container stored in the Zona Franca in Barcelona, Spain, November 3, 2022. REUTERS/Albert Gea/File Photo
Lisa Battle Line
LOS ANGELES (Reuters) – Recent hostilities in the Red Sea have disrupted companies transporting essential goods around the world. But this is not the only problem facing major airlines as 2024 begins.
Giants such as Maersk say the industry, which handles 90% of global trade, faces the possibility of significant disruption, from ongoing wars to droughts affecting key shipping routes such as the Panama Canal. For large container ships, fuel tankers and other goods carriers, complex vessel schedules are likely to be out of sync throughout the year.
This will lead to increased delays and increased costs for retailers such as Walmart (NYSE:), IKEA and Amazon (NASDAQ:), as well as food manufacturers such as Nestle and grocers, including Lidl.
“This is seemingly the new normal,” said Florida-based CEO Jay Foreman. “These waves of chaos go up and down, and before we get back to some level of normality, another event happens that messes things up.” “I do,” he said. Basic Fun sends toys from Chinese factories to Europe and the United States.
“Risks in 2024 include the possibility of Red Sea attacks expanding into the Arabian Gulf and a deterioration in China-Taiwan relations that could impact oil shipments,” said Peter Sand, senior analyst at cargo data provider Xeneta. He said. Russia’s war in Ukraine continues to impact grain trade following its invasion of Ukraine in 2022.
Maersk joined other major maritime carriers on Friday in rerouting ships in the Red Sea to avoid missile and drone attacks in the area leading to the vital Asia-Europe Suez Canal shortcut. This route handles more than 10% of all maritime transport and almost a third of global container trade.
Tankers carrying oil and fuel supplies bound for Europe continue to transit the Suez Canal, mostly container ships, as they attack Yemeni Houthi ships in the Red Sea to show support for Hamas, the Palestinian Islamist group fighting Israel in the Gaza Strip. We are rerouting goods around the southern tip of Africa. .
Fuel costs for ship owners to bypass the Suez Canal have risen by up to $2 million per round trip, while Asia-Europe spot rates have more than doubled from their 2023 average to $3,500 per 40-foot container. Rising costs could lead to higher consumer prices, but Goldman Sachs said Friday that the inflationary shock is unlikely to be as bad as the pandemic disruption of 2020-22.
“The first quarter is going to be a bit chaotic on everyone’s books from a cost standpoint,” said Alan Baer, CEO of OL USA, which handles freight forwarding for customers.
According to the supply chain software provider Project, traffic through the Panama Canal, an alternative to the Suez Canal, has fallen by 33% due to falling water levels44. These restrictions have resulted in sharply higher dry bulk shipping costs for commodities such as wheat, soybeans, iron ore, coal and fertilizer in late 2023.
Increasingly frequent severe weather events have a more immediate impact than political tensions. Brazil suffered a double whammy in late 2023, just months ahead of the peak soybean shipping season, with historic droughts in the Amazon and excessive rain in the north resulting in longer-than-usual waiting times for ships at Paranaguan ports.
“You can always say it’s a ‘one-time event,’ but if a one-time event happens every other month, it’s no longer a one-time event,” said John Kartsonas, managing partner at Breakwave Advisors. Transaction advisor to Breakwave Dry Bulk Shipping ETF.
