Global shippers of essential goods have been caught off guard by recent skirmishes in the Red Sea, but this is by far means the only problem big ships are confronting as 2024 gets underway.

The 90% global trade economy, according to behemoths like Maersk, could be severely disrupted by anything from continuing wars to droughts that damage vital routes like the Panama Canal. Large container ships, fuel tankers, and other commodity carriers may have complex vessel scheduling disruptions throughout the year.

This will cause more delays and expenses for food manufacturers like Nestle, grocers like Lidl, and retailers like Walmart, IKEA, and Amazon.

“This is seemingly the new normal – these waves of chaos that seem to rise and fall. Before you get back to some level of normalcy another event happens that sort of throws things out of whack,” said Jay Foreman, CEO of Florida-based Basic Fun, who sends toys from factories in China to Europe and the United States.

According to Peter Sand, chief analyst at freight data company Xeneta, additional risks for 2024 include the potential for Red Sea attacks to spread to the Arabian Gulf, which may impact oil shipments, and further deterioration of China-Taiwan ties, which could also impact crucial trade channels. Since Russia invaded its neighbour in 2022, the war in Ukraine has continued to have an impact on the grain trade.

Maersk rerouted ships away from the Red Sea on Friday, joining other major ocean carriers in doing so to prevent missile and drone threats in an area that leads to the crucial Suez Canal shortcut between Europe and Asia. Nearly one-third of global container traffic and more than 10% of all maritime cargo are handled along that route.

The majority of container ships are rerouting cargo around Africa’s southern tip as Yemeni Houthis assault vessels in the Red Sea as a show of solidarity for Palestinian Islamist party Hamas fighting Israel in Gaza, but tankers transporting oil and gasoline supplies for Europe continue to travel through the Suez Canal.

Fuel expenses for ship owners experiencing Suez Canal diversions have increased to as much as $2 million per round trip, while the average spot pricing for Asia-Europe has more than quadrupled to $3,500 per 40-foot container from 2023. Customer prices may rise as a result of the greater expenses, but Goldman Sachs stated on Friday that the inflation shock should not be as severe as the pandemonium caused by the 2020–22 pandemic.

According to Alan Baer, CEO of OL USA, a company that manages goods shipments for customers, “the first quarter is gonna be a little crazy for everybody’s books” in terms of expenses.

Lower water levels have resulted in a 33% decrease in crossings through the Panama Canal, an alternative to the Suez Canal, according to supply chain software vendor project44. These limitations contributed to a dramatic increase in the cost of dry bulk shipping for commodities such as wheat, soybeans, coal, iron ore, and fertiliser in late 2023.

Political tensions are not as rapid of an impact as more frequent severe weather disasters.

Just months before the busiest time of year for soybean shipping, in late 2023, Brazil experienced a longer-than-normal ship wait at the port of Paranagua as a result of a double-whammy that included an unprecedented drought in the Amazon and heavy rains in the north of the nation.

“You can always say, ‘It’s a one-off event,’ but if the one-off events happen every other month, they’re not anymore one-off events,” said John Kartsonas, managing partner at Breakwave Advisors, the commodity trading advisor for the Breakwave Dry Bulk Shipping ETF.

(Adapted from SCMP.com)

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