When it rains, it pours! In the Ocean.

20 January 2025

The positive news of the Gaza Ceasefire deal saving many lives has finally been announced. And the stock price of certain container shipping companies fell. 

Remember, the Red Sea Conflict and the resultant deviation to Cape of Good Hope added over 10 days to the voyages, causing shortages of ships. The resumption back to the Red Sea route will slowly increase the supply of ships and likely force the freight rates down. 

Let us combine this with,

➢ President Trump's announcements on Import Tariffs, especially on China. Nearshoring and reshoring being obvious alternates, companies will and should look to, likely again, to reduce long imports and freight rates;

➢ Potentially averted Longshoremen strike on the US East Coast, which had the potential to trigger a large and chaotic port congestion of ships;

➢ Most important and personally inexplicable to me, one of the largest new ins and order books (projected 30% increase by 2026 over 2023 to 33.4m TEU) of container ships book in history set to increase the supply of ships.

=All equals a supply-demand imbalance, needless to say, which side the scale is tipping towards. 

To predict the exact time of when this will play out is difficult to say. 

But do we sit and wait, or do we prepare?

Both the shipping companies and its customers should be gearing up now,

➢ Improve inventory visibility and controls. Inventories will arrive at different timelines. Yes sooner. But we don't want our inventory and working capital sitting ideal;

➢ Plan the shipping contracts. Shippers should plan a careful mix of Spots and long-term freight contracts for the nimbleness when the tide turns. Shipping Companies to watch the time charter tenor mix and select the redeliveries NOW with an eagle-eye;

➢ Pricing the product. The freight rates will have to be repriced by the shipping companies with re-routing to "old" ports, resumption to old networks and much more. Shippers will generally benefit from lower freights, so early birds to ship and price will win;

➢ Costs. This one never fails to deliver. Keep this under control and reduce it. Each cost, every time.

With so many moving parts, businesses must navigate an increasingly complex landscape. In such times, decision-making cannot rely on instinct alone but will have to be relied upon accurate, well analysed data provided by Finance to Business teams to distinguish the order from the clutter and fast.

Share your thoughts with me here on the developments in the industry and how you are getting prepared for the changes.

#GlobalTrade #ShippingIndustry #SupplyChainTrends