London - Mr. Chris Rogers, head of supply chain research for S&P Global, said the disruptions the logistics world is currently facing will continue for the rest of the year, but the costs associated with shipping have not gone up as much as the spot rates did during the Red Sea attacks and the Panama Canal drought issues, leading to the recent pricing reversal.

“We’re continuing to see those rates drift down,” Rogers said. “That may continue through the rest of the year.

Mr. Lars Jensen, Vespucci CEO, said he expected the spot rate decline to continue, but rates will vary depending on the global trade lane.

“You’re going to see increases, especially in contract rates Asia to Europe and Asia to U.S. East Coast, because we just don’t have the Suez,” said Jensen. “We also have the Panama Canal issue. But I am not that convinced you’re going to see dramatic increases in contract rates to the U.S. West Coast.” 

Mr. Zvi Schreiber, CEO of Freightos, a digital booking platform for international air and ocean freight, said even though Asia to West Coast freight rates are lower than the East Coast rates because it’s a shorter route, they have spiked due to both geopolitics and climate change.

“The Suez diversions affect the whole network,” Schrieber said. “The Panama Canal I think is recovering now, but it is well below its full capacity because of a drought. They depend on rain there to fill the locks in that canal so a lot of importers would prefer to bring their goods into Long Beach port where they’re not dependent on the Panama Canal.”

West Coast ports, in general, have seen a bump in volume due to a variety of issues, including the Panama Canal. The Port of Los Angeles announced a 60% increase in container processing for February year over year. It was the seventh-consecutive month of year-over-year growth at the nation’s busiest port. For the two months into 2024, the port has a 35% increase over 2023 during the same time frame.

Another headwind for the East Coast ports is a possible longshoremen strike in the fall.

“Buyers are expecting price reductions in weeks to come, while sellers are holding off the inventory as they expect prices to remain stable due to tight capacity,” Mr. Roeloffs said.

The Red Sea diversions and what can be described as a highly imbalanced trade environment are adding to issues in the container market, Roeloffs said, pointing to China-Russia trade as an example. Chinese exports to Russia grew by 12.5% year-over-year in the first two months of 2024, while imports rose by 6.7%.

These growing trade imbalances have impacted the work needed in the supply chain to reposition empty containers.

“We can see there’s an increase in the need to move empty containers of 20%,” said Mr. Alan Murphy, co-founder and CEO, of Sea-Intelligence. “We’re not seeing the ramifications yet because those empty containers have not started getting repatriated back. The question is, is that surplus of empty containers in Asia, or is it stuck across North America or across Europe? When you have longer transit times you extend the supply chains, and you have more equipment tied up in that supply chain. So, that could be a downstream consequence of the Red Sea crisis that could push rates up again.”