Ocean Rates Rise Amidst Global Factors

Global factors are affecting ocean transportation in a negative way. Rates are expected to rise for the foreseeable future as current transits are delayed and containers shortages occur.

Red Sea Disruptions

The Suez Canal is no stranger to delays after hitting headlines in March 2021 for the stuck container ship. Due to rising conflicts in the Red Sea, multiple carriers have suspended service temporarily. Large ocean carriers, such as Maersk, halted operations due to safety concerns.

This gives carriers the tough decision of waiting for the conflict to resolve, or finding an alternative route. Typically, around the Cape of Good Hope. The latter decision would require ships to take a much longer route, taking containerships out of commission longer and cost much more to take the trip.

Panama Canal Water Levels

The Panama Canal has been affected by droughts in 2023 that have hindered operations. Water levels have lowered six feet than normal. Currently, a maximum of 24 ships per day are able to cross the Panama Canal, much lower than the normal 38 ships per day in the past. Not only is there a constraint on the amount of ships, but ships crossing have weight limits and limits on number of containers on ships.

Similar to the Suez Canal, the Panama Canal provides container ships access to a shorter route. Container ships companies have the tough decision to either wait in long queues to cross the Panama Canal or taking a longer route to the final destination. Either way, delays are happening and ocean rates are rising.

Ocean Rates

While the full impact has yet to be realized, ocean freight rates are expected to considerably rise. Ocean rates have been decompressing since January 2022 after the historical highs after COVID Lockdowns. In the last week, rates have spiked considerably.

Below is a chart found on a FreightWave Article:

(Chart Source: FreightWaves Based on Data from Platts)

TLI will continue to monitor the situation for our clients and provide updates when available. If you have any additional questions, please reach out to your dedicated TLI Rep for answers.