Written by Lisa Bertlin
LOS ANGELES (Reuters) – Recent hostilities in the Red Sea have thrown global shippers of vital goods for a loop – but they are not the only problem major carriers face as 2024 begins.
Giants like Maersk say the industry, which handles 90% of global trade, faces the potential for major disruptions, from ongoing wars to drought affecting major routes such as the Panama Canal. Complex ship schedules are likely to be canceled asynchronously for giant container ships, bunker tankers and other commodity carriers throughout the year.
This will increase delays and increase costs for retailers such as Walmart, IKEA and Amazon, as well as food makers such as Nestle and grocers including Lidl.
“This seems to be the new normal — these waves of chaos that seem to go up and down,” said Jay Foreman, CEO of the Florida-based company. “Before you get back to a certain level of normalcy, another event occurs that throws things out of control.” Basic Fun, which sends toys from factories in China to Europe and the United States.
Additional risks for 2024 include the potential expansion of Red Sea attacks into the Persian Gulf, which could impact oil shipments, and further strained relations between China and Taiwan that could also affect important trade lanes, said Peter Sand, senior analyst at shipping data provider Zeneta. Russia's war in Ukraine continues to impact grain trade since it invaded its neighbor in 2022.
Maersk on Friday joined other major shipping companies in redirecting ships away from the Red Sea to avoid missile and drone attacks in the region that are cutting short the vital Suez Canal between Asia and Europe. This route handles more than 10% of all maritime shipments and nearly a third of the world's container trade.
While tankers carrying oil and fuel supplies to Europe continue to pass through the Suez Canal, most container ships are rerouting cargo around the southern tip of Africa, where Yemen's Houthis are attacking ships in the Red Sea in a show of support for the Palestinian Islamist group Hamas, which is fighting Israel in Gaza. .
Fuel costs for shipowners are rising by up to $2 million per round trip for Suez Canal diversions, and the spot rate to Asia and Europe has doubled from the 2023 average to $3,500 per 40-foot container. Rising costs could translate into higher prices for consumers, although Goldman Sachs said on Friday that the inflation shock need not be as bad as the pandemic chaos of 2020-2022.
“The first quarter is going to be a little crazy for everyone's books” when it comes to costs, said Alan Baer, CEO of OL USA, which handles freight shipments for customers.
Crossings through the Panama Canal, an alternative to the Suez Canal, have fallen by 33% due to lower water levels, according to supply chain software provider Project44. These restrictions helped raise bulk shipping costs for commodities such as wheat, soybeans, iron ore, coal and fertilizer sharply in late 2023.
Increasingly frequent severe weather events have a more immediate impact than political tensions. Brazil has suffered the double whammy of historic drought in the Amazon and heavy rains in the north of the country, contributing to longer-than-usual line-ups of ships at the Port of Paranagua in late 2023, just months before the peak soybean shipping season.
“You can always say it's a one-time event, but if one-time events happen every two months, they're no longer one-time events,” said John Kartsonas, managing partner at Breakwave Advisors, a commodities firm. Trading advisor for the Breakwave Dry Bulk Shipping ETF.
(Reporting by Lisa Bertlein in Los Angeles; Karl Bloom in Chicago; Marcelo Teixeira in New York and Ana Mano in Sao Paulo; Editing by Alistair Bell)
