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Attacks on commercial vessels by Iran-backed Houthi rebels in Yemen have increased significantly, and global trade is feeling the impacts. A number of container ships have been targeted in the Red Sea, and there are also reports that a bulk carrier was hijacked by Somali pirates in the same vicinity.

Most ocean carriers have now either paused vessels scheduled to transit the Suez Canal or have announced re-routes around the Cape of Good Hope. The US is currently deploying naval ships to assist with escorting commercial vessels and mitigating the risk of transiting the region.

30% of global trade transits the Suez Canal, so most East-West trade lanes will see impacts to transit times and shipping costs. This comes at the same time the Panama Canal, the other major gateway between the US East/Gulf Coast and Asia, is under majority capacity restrictions due to low-water levels. Longer transit times, the result of delays at the Panama Canal and re-routes via longer shipper routes like the Cape of Good Hope, mean a reduction in effective capacity in the market, which will put upward pressure on freight rates. Rising insurance costs amid increased risk for carriers will have the same effect.

Volumes shipping from Asia to the US and Europe are expected to increase ahead of the Lunar New Year holiday, which begins February 10. The JOC is reporting that US retailers are increasing their forecasts for early 2024 thanks to strong holiday sales. Carriers have successfully implemented a rate increase as of December 15, and they are planning an additional increase for January 1. The increases will stick if the global challenges continue, and volume increases materialize.

There will also be more volume shifting to US West Coast gateways, a result of a variety of factors: a natural re-shift back to West Coast ports since their labor contract was finalized earlier this year; shippers avoiding longer, unreliable transits to East and Gulf Coast ports due to Panama and Suez Canal challenges; and growing concern about potential operational disruptions during the upcoming East/Gulf Coast labor contract negotiations.

With the myriad challenges in the market, we highly recommend shippers build in extra lead time of at least 2 weeks for all shipments between Asia and the US East/Gulf Coast. The situation is very fluid and is likely to be volatile for a while; carriers are announcing changes to vessel schedules almost case-by-case. For time sensitive shipments, consider West Coast gateways or air freight.

 

 

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Your CVI team is here to assist you through these current market challenges. Ocean freight, air freight, domestic road/rail, and Customs Compliance – count on our dedicated professionals to care for you and your supply chain. Call us and let us show you what we can do!

 

Rachel Shames

VP, Pricing & Procurement

CV International, Inc.

 

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Rachel serves as Vice President, Pricing and Procurement for CVI. Her responsibilities include vendor selection, contract management and negotiation, transportation pricing, FMC compliance, and international agent network management.

Rachel began her career in international shipping with CMA-CGM America. She joined CVI in 2011, gaining experience in various departments with a focus on inside sales and marketing for the company. In 2014, Rachel assumed the role of Manager, Transportation, working on service procurement and development of client proposals. She has served in her current position since 2018.

A native of Norfolk, Virginia, Rachel earned her bachelor’s degree from the University of Michigan in 2005. She holds a Master of Business Administration with a concentration in Maritime and Supply Chain Management from Old Dominion University.

– Rachel Shames, VP, Pricing & Procurement, CVI
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