Falling into 2024: Ocean Export Market Outlook

As the year draws to a close, our attention turns towards the concerns and outlook for 2024, particularly in the context of US exporters. In our ongoing discussions with exporters, we often find that their most pressing questions revolve around the following topics: 

  1. Ocean Export Market Rates 
  2. Space and Capacity 
  3. Equipment Availability 

This blog post will explore these in more detail. 

1. Ocean Export Market Rates 

Rates for the most part are showing a gradual decline. Some carriers have announced a November 15th General Rate Increase (GRI), primarily affecting shipments from the IPI locations to Asia. However, despite these fluctuations, it remains to be seen whether these rate changes will hold steady. Export GRIs have been few and far between in recent months, making predictions a challenging task. 

Adding to the pricing dynamic is the matter of bunker fuel. Some carriers have been playing a rather interesting game here. While they announce increases in bunker fuel prices, they simultaneously drop their base rates, effectively maintaining the overall rate status quo. This strategy adds another layer of complexity to the pricing equation. 

Impact of Fuel 

Two key factors that have been on everyone's radar recently are fuel prices, specifically diesel and bunker fuel. The burning question on everyone's mind has been, "What's the forecast for fuel costs in the coming months?" 

After a two-month climb, they've recently taken a dip, creating a level of uncertainty in the industry. This seesawing trend has led to increased fuel surcharges for dray pricing, not only for ocean exports but also for domestic shipments. The recent stabilization of fuel prices has left industry experts with a watchful eye, particularly when it comes to diesel. 

2. Space and Capacity  

Similar to the import market, there has been a related surge in additional capacity coming online for the ocean export market, leading to various strategies employed by carriers to manage this surplus. One noteworthy approach is the adoption of "slow steaming" and the emergence of "super slow steaming." Carriers are utilizing the excess capacity by integrating it into their existing shipping routes, but then intentionally reducing the speed of their vessels. This approach allows them to conserve bunker fuel and maximize the utilization of their newly acquired assets without the need for dry docking. However, the consequence for shippers is a considerable extension of on-water transit times, as vessels that were already operating at relatively slow speeds are now moving even more slowly. 

Another notable trend is the practice of "blank sailings" and service cuts. Carriers have become increasingly adept at managing their capacity by not deploying ships unless they are at or near full capacity. This has been particularly evident in the transatlantic trade, and likely applies to the trans-Pacific trade as well. In this context, import volumes have fallen to negative levels, while export rates have reached very low levels, with carriers often operating at a loss or negligible contribution margins. These trends reflect the dynamic nature of the ocean export market, with carriers continually adjusting their strategies to cope with fluctuations in capacity and market conditions. 

 3. Equipment  

Ocean export equipment availability varies significantly depending on the location and the specific carriers involved. While ports generally have an ample supply of equipment, the situation can be notably different at the Inland Point Intermodal (IPI) level, where the availability of containers and other essential equipment is highly carrier and location specific. For example, in Kansas City, certain carriers like Yang Ming, Costco, and MSC may have limited equipment, while just weeks ago, CMA had over 500 forty-foot containers available. This underscores the challenge of projecting equipment availability, emphasizing that it's far from a one-size-fits-all scenario, making effective communication and planning in the industry a complex task. 

Other considerations 

The upcoming labor situation on the US East Coast ports is expected to mirror the demands and negotiations that took place on the West Coast. While early negotiations were initiated earlier in the year, they were abruptly halted in March. Despite the contract not being due for another 10 to 11 months, there is growing concern over potential labor actions, including possible work slowdowns, as East Coast labor seeks similar terms and concessions to their West Coast counterparts. The situation remains tense, with uncertainties surrounding the future of negotiations and their potential impact on the flow of goods through these crucial ports. 

In an environment of ongoing economic and market volatility, exporters should anticipate potential disruptions in their shipment processes, including issues related to maintaining a steady flow of goods, coping with cost fluctuations, and ensuring access to carrier capacity and equipment. To navigate these challenges effectively, it remains imperative for exporters to maintain strong collaboration with their logistics partners and communicate their requirements with ample lead time. 

To see how we can help with your export challenges, or for any questions, contact Marc Van Gorp, National Export Business Development Manager, or contact your local sales representative.