Looking Ahead: Sea Freight in the Second Half of 2024

As we enter the second half of 2024, the sea freight industry faces significant uncertainties, particularly around supply.

Diversions around the Red Sea and ongoing port congestion have absorbed any excess capacity that existed at the end of 2023.

Since early May, spot rates have more than doubled, and with the market moving into its traditional peak season, these supply issues are becoming increasingly critical.

Rising Rates and Supply Pressures
Spot container rates from Asia to Europe and the US could soon reach $10,000/40’ and while additional disruptions would be necessary for rates to climb back to the pandemic highs of $15,000 to $20,000, it remains within the realm of possibility.

We are likely to experience significant pressure over the next few months, potentially pushing rates to $15,000 per container. However, this surge is expected to be shorter-lived compared to the prolonged high rates during the pandemic.

Port Congestion and Shipping Delays
In the second quarter, ship bunching and congestion spread to ports across Asia, including Port Klang, Shanghai, Qingdao, Guangzhou and Shenzhen and while this congestion has eased somewhat due to increased transshipment through India, it is now facing its own congestion issues. In Singapore, delayed shipments increased by almost 50% in May compared to the previous year, and as of June 25th, delays were up 27% year-over-year.

Demand Surge and Market Strain
The current surge in demand is driven by the fear of missing out, a behaviour developed during the pandemic. Imminent US tariffs on Chinese imports and the potential for a late-summer strike at East and Gulf coast ports are prompting earlier-than-usual orders. Global shipping delays and a shortage of empty containers in key export markets are likely to continue causing strain over the coming months.

Outlooks for H2 2024

Gloomy
Ships continue to avoid the Red Sea, early peak-season demand remains strong, and port congestion persists for months. This scenario could extend global disruptions past the Chinese Lunar New Year in late January 2025. Additionally, a strike by dockworkers on the US East and Gulf coasts could push container rates back to pandemic highs.

Hopeful
If the Houthi attacks in the Red Sea cease, carriers could resume sailing through the Suez Canal, improving schedule reliability. After a few chaotic months, capacity could surpass demand, causing cargo rates to drop sharply, potentially returning to pre-pandemic levels between Asia and the US and Europe.

Pragmatic
Current strong demand softens, indicating that early peak-season orders were pulled forward due to looming US tariffs on Chinese imports, Red Sea delays, and port strike concerns. Spot rates might peak around $10,000 per 40-foot container in Q3 but are expected to decrease later in the year.

Our Commitment to you
Regardless of how the sea freight market evolves, our long-term carrier relationships gives us access to the space and rates to consistently deliver cost-effective, resilient, and reliable ocean freight solutions.

To learn how we can protect your supply chain, please EMAIL our managing director, Colin Redman.