Attention Ocean Shippers: Are Supply Chain Storms Ahead?

Jun 19, 2024

 

 

Over the past four-five weeks, we have seen rates for ocean containers skyrocket. So it is not too surprising that we’ve been getting an increasing number of calls from shippers who are asking for help understanding and addressing the ocean freight marketplace issues.

Just about everybody wants to know the response to this statement that was posed to me by a CEO who is also a good friend: "Mike, tell me we’re not seeing a replay of what happened in 2021 and 2022 when ocean container rates went through the roof!” 


I told him I would do what I always do when customers and friends raise concerns about various logistics and supply chain issues. To wit, I take advantage of TranzAct’s great network to bring you actionable intelligence on what’s happening and how it will likely impact your business, plus options and alternatives your company can consider to protect your supply chains.

After looking at all the data gleaned from processing millions of transactions, talking with great financial analysts and journalists who cover the ocean markets, and then finally, talking to shippers about what they are actually seeing, what we learned was succinctly summed up by a friend who happens to be a very, very large ocean shipper:

Mike, the ocean market continues to be nuts. Capacity in the trans-Pacific lanes remains tight. Spot rates are expected to go above $8,000 per container. In the upcoming weeks – by mid-July – charter agreements are up by 10% even though there’s been an additional 3 million TEUs added to the market this year. And the carriers are enforcing MQC - minimum quantity contract levels with shippers.

We also learned from the financial analysts and journalists covering the ocean markets that even though ocean rates have more than doubled in the last 60 days, shippers are likely to see them go higher in the next 60 to 90 days. How much higher? Shippers shouldn’t be too surprised to see rates in the $10,000 to $12,000 range – and that is assuming there are no “Black Swan” events like ships being sunk by the Houthis in the Red Sea, or turbulent waters around the Cape of Good Hope causing an increase in the number of “Blank Sailings.”

And believe it or not, on top of what are already precarious circumstances affecting costs, there is also the looming threat that there will be a strike at the East Coast ports when the ILA contract expires on September 30, 2024. And if you have the time you might want to check out this article about why the lead negotiator for the ILA, Harold Daggett, and the union members are not too happy right now. 

For those who have already reached out, we have shared some strategies and options that companies should be considering. We have also highlighted how our  Supply Chain Rapid Assessment has proven to be very valuable for companies to uncover the imperatives and actions needed to protect their supply chains for the remainder of 2024. This assessment can help your company avoid cost increases or service disruptions, and very importantly, any other issue that could affect your balance sheets. The feedback has been very good and we are always glad to help.

If you are interested in learning more, simply give me a call at 630-530-6190, send me an email, or schedule a meeting with me via Calendly. 

 

BY MIKE REGAN, CO-FOUNDER OF TRANZACT

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