As the Russia-Ukraine war enters its third year, and Houthi rebel attacks in the Red Sea have been going on for four-plus months, disruptions affecting world trade and the global freight market can almost feel like another “new normal.” Add in the Panama Canal drought plus worldwide economic uncertainty, and the picture is challenging for shippers through the rest of 2024. Here are some top stories from the past week that highlight how world events are impacting the freight industry.
CMA CGM Posts a Loss, Red Sea Crisis Cited
French conglomerate CMA CGM, the world’s third-largest container shipping line, had its first quarterly loss in four years as overcapacity continues to be a concern. This followed reports of a difficult near-term outlook from rivals Maersk and Hapag-Lloyd AG, the second and fifth-largest ocean freight carriers, respectively. “Volume growth should remain strong in the first half, buoyed by prior-year comparatives, but the second half looks more uncertain,” CMA CGM said in a statement. “New container shipping capacity is expected to come into service, pushing global supply in excess of forecast demand, with an adverse impact on freight rates.”
TEU Growth Driven By Disruption
The latest data from freight market intelligence firm Drewry shows that the total worldwide stock of 20-foot equivalent containers (TEU) has increased by 1% to 51.5 million TEUs at the end of 2023. Factors include the ongoing conflict in Ukraine affecting Black Sea trade, the Houthi attacks in the Red Sea, and the Panama Canal drought, as well as a 2.3% surge in new vessel construction. Drewy also reported that its World Container Index, which tracks the average price of a 40-foot container shipment, was down 2% on Feb. 22 compared to the prior week, at $3,659. While down 7.6% from a high of $3,964 on Jan. 24, the Drewy index was up 164.7% from a 12-month low of $1,382 on Nov. 30, 2023.
Massive Growth of Shein, Temu, TikTok Shop Hitting Air Freight Rates
Chinese fast-fashion giants Shein and Temu, along with TikTok Shops, are impacting air freight rates from Asian hubs based on massive e-commerce shipment volumes. This is not only causing air freight rates to rise from these export centers but is also squeezing out other shippers. “The biggest trend impacting air freight right now is not the Red Sea, it’s Chinese e-commerce companies like Shein or Temu,” Basile Ricard, director of Greater China operations for freight forwarder Bollore Logistics, told Japan Times. Data from Cargo Facts Consulting estimates Temu’s daily air freight volume is 4,000 metric tons, Shein is at 5,000 metric tons, Alibaba equals 1,000 metric tons, and TikTok 800 metric tons. This is the equivalent of about 108 Boeing 777 freighters a day.
U.S., South Korea Place New Trade Restrictions Related to Supporting Russia in Ukraine War
The Biden administration on Feb. 23 placed new trade restrictions on 93 entities from Russia, China, Turkey, the United Arab Emirates, Kyrgyzstan, India, and South Korea for supporting Russia’s war effort in Ukraine, the government reported. Separately, the administration launched 500 new sanctions against Russia, in the wake of the death of dissident Alexei Navalny. The actions came one day before the second anniversary of the conflict. The U.S. government has issued more than 4,000 sanctions since the war began. In a related effort, the South Korean Ministry of Trade, Energy and Industry tightened export controls to Russia and Belarus on so-called dual-use items with civilian and military applications. concerning items that could potentially be used for military purposes, as announced today by the trade ministry, as reported by Yonhap News Agency. South Korea added 682 products to its banned export list, bringing the total to 1,159.
East Coast Port Labor Picture Remains Cloudy
Contract negotiators for the union representing East and Gulf Coast dock workers and port operators remain apart on wage issues, with the possibility of a crippling strike this fall causing concern among shippers. The International Longshoremen’s Association (ILA), which represents 70,000 dock workers from Maine to Texas, has made it clear to the United States Maritime Alliance (USMX), representing 36 port operators, that they are preparing for a strike if there is no settlement by Sept. 30. Like their West coast union brethren who reached a deal in 2023 after a tense standoff, the ILA is opposed to port automation efforts, which they see as a threat to dock worker jobs.
Be Prepared to Deal With Freight Disruptions
Whether it’s labor issues threatening port shutdowns, new trade restrictions, fluctuating carrier rates, or geopolitical conflicts causing transit delays, freight disruptions are a fact of life. With no end in sight for the war in Ukraine, or the Houthi attacks shutting down most Red Sea traffic, expect more of the same through 2024.
A trusted logistics partner can help guide you through these kinds of market turbulence and develop solutions geared toward risk mitigation and overcoming obstacles. COGISTICS Transportation offers a combination of agile, efficient operations, regulatory expertise, and cutting-edge technology. From booking through delivery, COGISTICS Transportation can manage all aspects of your domestic and global freight needs, for a worry-free experience. Contact us today.
