Keith Sarnell, Vice President of OEC Group’s Great Plains Region, discusses the critical issues that people will be talking about at this year’s Trans-Pacific Maritime conference (TPM).
How will the industry be affected by the change in alliances?
It is hard to say what effect the reshuffling of alliances will have on the industry as this clearly creates more questions than answers as carriers try to figure out how and with whom they will conduct business.
However, this creates a unique opportunity for shippers to start making partnerships with companies that can provide a plethora of shipping options. These partnerships will educate and give them insight into all the other options that are available, allowing shippers to make the most advantageous decisions for their organizations by being able to plan around current and future market fluctuations.
Why are trans-Pacific rates rising when the real issues are those affecting trade lanes between Asia to Europe and the Mediterranean?
To understand why rates are increasing across the board you really have to look at the global supply chain and what is going on in the world. In this case there has been much higher demand for goods on the Asia to Europe trade lane and less demand on the trans-Pacific trade lane.
This means that carriers have shifted vessels from a low-demand market to a high-demand market and are redeploying vessels accordingly. Once the Houthi Rebels started attacking commercial vessels and forcing them to go around Africa, adding at least ten days of transit time to by-pass the canal going one way, more vessels and resources were needed to take up the slack. As a result rates went up, and continue to rise across the board, regardless of trade lane.
Are people still concerned about “green” initiatives and what can they do to support those efforts?
The best advice I can give is to make a statement with your wallet. What this means is all companies should come up with a real plan that is funded by a budget so when you count your carbon consumption you can properly off-set by purchasing space on more environmentally friendly services.
This will encourage suppliers to replace their current gas guzzlers with “greener” solutions. It will also encourage the industry to conduct more research to determine which fuel is the most environmentally friendly, because they will realize that this is good for business. While it may cost shippers a little more in the short-run, it will, in the end help the planet and help prevent more issues such as the drought in Panama, which is already costing shippers billions of dollars in higher rates because vessels now have to be on the water longer as they circumvent the canal.
What’s one piece of advice you have for shippers for the remainder of 2024?
Shippers should re-open their COVID playbooks because the knock-on effect from the Panama Canal Water Restrictions and the Houthi Rebel Attacks is that there will continue to be schedule reliability and container equipment issues that will, in all likelihood, plague the industry for the entire year. This will cause rates to continue to rise and remain high for long periods of time.
As a result, shippers should be working with an experienced company that has connections with all carriers in order to not just secure the best possible rates, but to also keep their cargo moving, as cancelled sailings will continue to torment the industry. Not establishing a relationship with a well-respected and connected company is just begging for trouble that will ultimately result in shippers paying an exorbitant amount to bail themselves out.