The Current Situation: A Rocky July for Importers

Importers are holding their breath every two weeks, hoping for some stability in spot ocean freight rates and reduced congestion at major US ports. Unfortunately, July has not brought any relief.

Contributing Factors: From Houthi Attacks to US Tariffs

Initially, disruptions were driven by the Houthi attacks in the Red Sea and the severe drought in the Panama Canal. Now, the situation is further complicated by major US tariff schedules and the efforts of shipping companies to recover from Q1 losses.

The Impact of US Tariff Expansions

On May 14, 2024, the Biden administration announced expansions to the United States’ Section 301 tariffs on imports from China. This proposal includes significant tariff increases on solar panels, electric vehicles, batteries, green energy supply chain inputs, ship-to-shore port cranes, steel products, aluminum products, medical syringes, and personal protective equipment (PPE). Tariffs on items like batteries, electric vehicles, PPE, and needles, which currently range from 0% to higher rates, will rise up to 100%, fully phased in by August 1st. This has led to a rush on containers being imported before this date, further driving up demand.

Ocean Carriers Seizing Opportunities

After a challenging Q1 marked by widespread losses due to low freight rates and unexpectedly strong trade following the pandemic, ocean carriers are now leveraging the current high-demand environment. For instance, CMA GCM reported a 7% decline in revenue despite a 12% year-over-year increase in transported TEUs. Carriers are capitalizing on this opportunity, using familiar tactics to boost revenues.

The Uncertain Future: What Lies Ahead?

The major question remains: What can we expect next? Will rates drop after the looming August 1st deadline? Will they soften further due to the influx of new ships? BIMCO reports that 478 container ships with a capacity of 3.1 million TEUs are scheduled for delivery, which could increase container fleet capacity by 10% in 2024.

Embracing the Unpredictability

The only certainty in our current logistics climate is its unpredictability. Stakeholders must brace for continued fluctuations and remain adaptable to the ever-changing dynamics of global trade and shipping.