2023 was a welcome relief for most shippers. The massive congestion during the pandemic had subsided. It was a year of relative calm for most businesses shipping internationally. However, in the past few weeks, global shipping has been impacted by two major events:
- Red Sea Crisis
Houthi rebels have been attacking vessels in the Red Sea. The Red Sea is an important corridor for vessels to get to and from the Suez Canal. Steamship lines have stopped shipping vessels through the Red Sea. Many vessels are being diverted around Africa’s Cape of Good Hope, adding over an additional week of transit time as well as increasing the cost of shipping.
- Panama Canal Drought Crisis
Panama has been facing a severe drought for a number of months. Without sufficient water, the canal’s lock systems are not able to adequately work to move vessels through the canal. This has led to huge delays for vessels seeking to transit the canal. The average wait time currently is over 11 days.
These two crises are impacting ocean freight shipping around the globe. There will be a trickle-down effect across the global supply chain. Vessels will be delayed returning to the ports. This in turn may lead to container imbalance with some ports experiencing shortages. Many shipments bound for the United States are being rerouted through the U.S. West Coast. We are expecting congestion to build up at West Coast ports in the coming weeks. We’re already seeing carriers announce longer transit times for various routings.
With Chinese New Year around the corner, carriers are expecting to see a bump up in demand for shipping through the end of the month. The Carriers are already announcing dramatic increases to ocean freight for the second half of the month of January.
It’s unclear what the state of shipping will be after the CNY. Shippers should be prepared for a period of supply chain instability in the coming months.