In recent analyses, we examined the effects of major maritime route deviations due to attacks on vessels in the Straits of Hormuz and Bab al-Mandab. These disruptions have significantly impacted the global logistics network. Longer voyages around the Cape of Good Hope result in delays, which in turn cause congestion at terminals. Adding to this equation are the drought conditions hindering normal use of the Panama Canal, the increasing influx of manufactured goods from China to Europe, and a rising demand for fresh products and raw materials from Latin American and African countries. This scenario is creating a near-perfect storm for Atlantic ports, many of which are suffering from severe congestion issues.
The variability in routes and longer voyages are leading to more transshipments, increased congestion, and subsequent delays. This situation is also associated with a notable rise in freight rates. Vessels circumventing the Cape of Good Hope and heading north tend to avoid entering the Mediterranean, transshipping goods at Tangier or Algeciras for Mediterranean destinations, causing further delays, additional transshipments, and increased costs.
These maritime transport disruptions are far from over, signaling a prolonged period of elevated freight rates.
China’s Export Surge
China’s exports grew by over 7% in May compared to the previous year, despite ongoing trade and geopolitical tensions. This rebound suggests increased demand from importing countries. In an effort to curb this escalation, the U.S. has imposed 100% tariffs on Chinese electric vehicles. Consequently, the IMF continues to raise growth forecasts for China, attributing it to the country’s aggressive industrial production strategy. These factors further strain the logistics chain and freight prices.
Challenges in the Middle Eastern straits highlight how any deterioration in tensions can exacerbate global maritime transport. However, China’s overproduction is leading to a flood of exports, overwhelming markets like Europe. This saturation is causing terminal congestion as logistics chains become overstretched.
Shipping Industry Challenges
Terminal yard saturation is causing vessels to wait for berths, creating significant issues for perishable and sensitive goods. Ships waiting at anchor before docking is a clear sign of tension in the system, where vessels usually dock immediately upon reaching their destination. This current disruptive reality of maritime transport stems from geopolitical, energy transition, and technological factors.
This constant unpredictability poses daily challenges for shipping companies. The industry’s need for continuous adaptability is akin to a “Darwinian” hypothesis: the species that survive are not the strongest but those most adaptable to change. This theory perfectly applies to the maritime industry.
Markets, Ports, and Digitalization
This variability causes market and demand fluctuations. While Europe and North America are mature markets, other regions, particularly around Beijing, are emerging with strong demand. Countries like Indonesia, Vietnam, and the Philippines are experiencing rising per capita incomes, influencing global demand. The significance of short-sea shipping and proximity to major production centers has become evident, particularly during the pandemic.
Managing these challenges would be impossible for any logistics or shipping company without a robust commitment to digitalization. Being in the right place at the right time is crucial, and real-time quality information is key to navigating constant market changes. Without management technology, companies risk missing opportunities or lagging behind competitors.
In ports, similar dynamics apply. Companies prefer working with facilities where operations can be managed remotely and efficiently, without the need for physical presence, saving valuable time. Advanced technology is essential for managing increasingly complex facilities efficiently, sustainably, and with greater responsiveness.
Freight Rates
Importers are struggling to meet client demands on time. Booking space on vessels to ensure timely shipment contributes to rising freight rates due to increased demand. This anticipation policy leads to preferential, but costlier, shipments, impacting the final customer.
Despite no significant increase in market consumption, the demand surge is driven by fear of shortages due to delays and terminal congestion. This situation also leads to “blank sailings” or itinerary cancellations by shipping lines. Short-term changes are not expected, according to major consulting firms.
The Mid-Atlantic and Bulk Carriers
Rising global demand for basic, strategic, and dry cargo products is boosting traffic for large bulk carriers. This market saw a 5% increase in 2023 and is expected to continue growing in 2024. China, the world’s largest importer of these products, relies on robust industrial strategies to support its exports, requiring secure energy sources, including coal plants and renewables.
Food demand is particularly driving this trend, fueled by global population growth. For instance, soybean exports from Argentina and Brazil are booming. Basic goods are also increasingly sourced from Africa, making the mid-Atlantic an essential strategic zone and a passage for a significant portion of the world’s largest fleets, including energy and bulk carriers. This trend is evidenced by the 2023 orders for 150 Kamsarmax and 150 Ultramax ships, indicating the market’s direction.
This vast fleet supplying global markets requires extensive maintenance services, alternative docking options, and substantial fuel supplies.
Mid-Atlantic ports must strive to provide comprehensive services to this fleet to maintain their leadership in offering top-tier services and not fall behind in the future.
