Shipment Delays May Increase Freight Costs in 2024

Author: Dian Kencana
December 27, 2023

Stacks of containers waiting to be shipped across the world. Photo: Wikipedia

SEAToday.com, Suez-Over 150 ships carrying more than 105 billion US dollars in cargo have been forced to divert their routes from the Red Sea and Suez Canal. As a result of rerouting, many other trade lanes have seen a 100 to 300 percent increase in freight rates.

Many shipping lines, including Maersk, Hapag Lloyd, and CMA CGM are being forced to reroute their vessels around Africa, which according to Clarkson, a global maritime and consulting service will increase
cargo voyages by 31 to 40 days cause not only delays and disruptions but also increase freight costs and transit times in the coming months.

These rate increases according to many shippers will only be felt once they hit it's the month mark, when the increases will be felt and seen in the supply chain and eventually at the consumer level.

This situation is exacerbated by record droughts in the Panama Canal that have hampered canal operations in recent years. A prolonged El Nino in Panama has led to record droughts, leaving the canal without enough water to lift and lower ships.

The lack of water has forced officials to reduce the number of ships allowed through from 38 to 32 per day in July then to 24 ships in November and finally to 18 ships starting next February.

Despite these potential disruptions in the coming months, after a tumultuous three years of inflationary pressures as well as disruptions caused by COVID-19, these disruptions have also helped push the combined net profits of shipping companies to a whopping 215 billion US dollars in 2022, allowing many companies to increase their freight capacity.