State of International Trade
The first quarter of 2024 once again highlighted the intricate web and interconnected nature of international freight and logistics. Now more than ever, global logistics is a topic on the mind of consumers around the world. A few of the biggest topics so far this year have revolved around the Port of Baltimore, the Red Sea, and nearshoring.
Baltimore Bridge Collapse
Just as things appeared to be returning to some semblance of normalcy, the MV Dali cargo ship slammed into one of the supports of the Francis Scott Key Bridge in Baltimore, throwing another wrench into the global supply chain. Salvage work is well underway with aims to reopen the port by May, but the ramifications will extend well beyond that. The financial and insurance ramifications of the collapse are the next piece of the puzzle. With the possibility of the Dali’s owner declaring General Average (GA) looming over the wreckage, this process has the potential to drag out over many years.
Red Sea Troubles
Another hot-button issue has been how conflict in the Middle East affected shipping routes, most notably through the Red Sea. The Red Sea is one of the most important maritime trade routes in the entire Eastern Hemisphere, so any disruption has a profound impact on trade.
Aside from shipping delays caused by the recent tensions, shippers are facing increased risks to cargo and personnel aboard these ships. Houthi rebel attacks on cargo ships have left shippers with more decisions to make when it comes to risk assessment around these trade routes.
These concerns have caused a ripple effect that impacts the global economy, as well. The World Bank predict the global economy will slow for the third straight year and is set for its weakest half-decade performance the past 30 years. Refined fuel prices also spiked to some of their highest prices in recent memory, in part due to a Houthi missile attack on a product tanker in January. The market is expected to adjust, but any further disruptions to shipping routes through the Red Sea could continue to affect prices.
Container and cargo rates have recently begun to dip back down again, but as we’ve seen, things could change in a hurry. It appears for now, though, that things are beginning to steady as it relates to shipping through the Red Sea.
With all these risks to consider, having a partner to help businesses navigate the complexities and perils of shipping is more important than ever before.
Nearshoring
One way to mitigate some of the risk of maritime shipping is nearshoring. Nearshoring isn’t necessarily a new strategy, but it has been becoming more and more prevalent in recent years. Nearshoring provides a slew of benefits, from cost savings to risk management to increased supply chain efficiency.
Just-in-time management strategies cause a lot of headaches for companies both during and after the pandemic. Nearshoring opportunities help companies avoid these same struggles by creating shorter lead times, improving communication, and cutting costs.
“More of our time is being spent on quoting freight out of Mexico for companies analyzing their nearshoring opportunities. We will see a shift in inbound container freight to inbound truckload freight. We will need to be quick on our feet since the transit time is 1 – 2 days from Mexico to the US border vs. 14 days on average from Asia to US ports,” says Matt Wilcox, Vice President & Managing Director, Scarbrough Transportation.
Contract Season
Contract season officially kicked off at the TPM Conference in Long Beach, Calif. in early March. Beneficial Cargo Owners (BCOs) and ocean freight shippers started to lock in their rates for 2024. Scarbrough had two team members, Director of Sales Evan Moon and Pricing Manager Justin Smith, onsite to meet partners and gauge what the Trans-Pacific Eastbound (TPEB) trade lane will look like in the coming year.
In Other News
Elsewhere around the world, Mexico is back to being the United States’ top trading partner ahead of China. China’s economy continues to falter, once again seeing a decline in growth that is expected to continue into 2025.
As election season heats up, the 2024 presidential election is sure to have a big impact on global markets moving forward. And other major developments, such as Artificial Intelligence, are helping to shape global logistics. Scarbrough is not new to this technology with investments made as early as 2019. In addition to these early investments, Scarbrough recently inked a partnership with Altana Technologies (the same tech that U.S. Customs & Border Protection uses) that will allow us to create a real-time map of our clients’ international supply chains to simplify the logistics web for our clients and identify potential problems before they arise.
With so much going on and the constant changes in the world of logistics, it’s no wonder more businesses are looking for a partner like Scarbrough to help them navigate these complex times. Contact us to learn more about how Scarbrough can make your logistics problem our problem.