Baltimore, Panama Operations Improvements Fail To Offset Red Sea Shipping Woes

The Port of Baltimore is restoring normal operations, and now cruise line calls have recently returned. That is a relief, especially for bulk and RoRo shippers for whom Baltimore is an important east-coast gateway.

Rain has returned to Panama, filling Lake Gatun and allowing increased transits through the Panama Canal.

Those improvements have not been enough to stabilize container freight shipping costs and delays. Problems in the Red Sea are adding up to two weeks of transit times to routes that normally used the Suez Canal. That two weeks of lost container and vessel capacity are causing delays at major international shipping hubs, including the world's largestSingapore.

The Dali sailed to Norfolk, Virginia with the assistance of four tugboats, removing one of the last reminders of the Francis Scott Key Bridge collapse. Approximately 50,000 tons of wreckage have also been removed to allow the Port of Baltimore to reopen completely.

The National Transportation Safety Board (NTSB), FBI and US Coast Guard are still investigating the crash, and costs for reconstructing the bridge by 2028 are expected to reach $1.9 billion.

Despite this improvement in ocean shipping reliability, Houthi rebels in Yemen are still firing on ships entering the Red Sea en route to the Suez Canal. In recent weeks, such assaults have sunk two vessels, including a Greek-owned ship carrying coal.

With container traffic through the Suez Canal dropping to one-tenth of its usual flow, most ships moving between Asia and Europe now circumnavigate Africa, which entails burning more fuel during the 11-14 days required for the extra travel.

At the same time, carriers have concentrated their fleets on the most lucrative routes, those connecting destinations like Shanghai and the Dutch port of Rotterdam, Europe’s busiest. That has forced cargo bound for other places to stop for loading and reloading at major hubs known as transshipment ports.

The largest such ports, including Singapore and the Sri Lankan capital, Colombo, are now overwhelmed with incoming vessels. Ships must wait at anchor for as long as a week before pulling up to the docks.

Adding to shipping uncertainty is an ILA dockworker threat to strike on the East and Gulf Coasts of the United States, while longshore workers at German ports have already halted shifts. Rail workers in Canada are poised to walk off the job, creating backups at Vancouver and British Columbia.

The intensifying upheaval in shipping is prompting carriers to lift rates while raising the specter of waterborne gridlock that could again threaten retailers with product shortages during the make-or-break holiday shopping season. The disruption could also exacerbate inflation, a source of economic anxiety animating the American presidential election.

Since October, the cost of moving a 40-foot shipping container from China to Europe has increased to about $7,000, from an average of roughly $1,200, according to data compiled by Xeneta, a cargo analytics company based in Norway. That is well below the $15,000 peak reached in late 2021, when supply chain disruptions were at their worst, but it is about five times the prices that prevailed for the years leading up to the pandemic.

Rates to ship goods across the Pacific have multiplied by a similar magnitude. It now costs over $6,700 to transport a 40-foot container from Shanghai to Los Angeles, and nearly $8,000 for Shanghai to New York. As recently as December, those costs were near $2,000.

“We haven’t seen the peak yet,” said Peter Sand, Xeneta’s chief analyst.

Three primary alliances of carriers control 95 percent of the container traffic between Asia and Europe and more than 90 percent between Asia and the East Coast of the United States, according to the International Transport Forum, an intergovernmental organization in Paris with 69 member countries including China and the United States.