The standard Red Sea diversion routes have offered some clarity to companies in their supply chain planning. However, the duration of these diversions is a key factor to consider when strategizing for peak season.
The extended transit time of containers on the water is causing delays in returning them to manufacturers for filling with U.S. imports. This delay is leading to a 16% increase in global twenty-foot equivalent unit miles, according to Sea-Intelligence CEO Alan Murphy.
As companies prepare for the normal peak season between July and October, they must evaluate the robustness of their multi-carrier strategy when negotiating contracts with ocean carriers. Freight rates are on the rise, with Far East to East Coast rates up by 145.5% and Far East to West Coast rates increasing by 186.2% since December 14.
Maersk North America’s regional president, Charles van der Steene, anticipates that the longer transit routes resulting from the Red Sea diversions could continue through Q2 and potentially Q3. Other industry experts, such as Honour Lane Shipping (HLS), also believe that the Suez Canal diversions will persist at least until the first half of 2024.
Concerns about container contraction due to containers being on longer voyages are mounting, especially with increasing consumer demand. HLS is optimistic about the American consumer market and expects import volumes to the US West Coast to rise in 2024.
Various equipment shortages or tightness in carriers in Asian countries are adding to the challenges. Logistics managers need to stay agile and prepared to ensure trade continues to flow smoothly in the coming months.
