511 - Market Update Q1 2024

Economy and Supply Chain

Q1 2024 Market Update

SUMMARY: Middle East War & Panama Drought Increasing Transit Times, Shipping Expense, Product Cost

Four of the top five largest container carriers will be avoiding the Red Sea and the Suez Canal until security is restored to the waterway. Together with Israeli shipping line ZIM, who was already diverting its Red Sea traffic, these carriers represent 56 percent of global capacity, meaning an estimated 17 percent of global volumes will be taking a longer, more expensive route from Asia around the southern coast of Africa. Container diversions are adding 7 to 15 days transit time depending on the lane and 15 to 20 percent increase in costs for carriers; the more days freight remain on the ship, the higher the invoice price for the shipment. Shortages of shipping containers, another “ripple” effect of elongated shipping times, are beginning to be reported by some northern China ports. DHL Global Logistics .

Spot rate quotes for trans-pacific cargo shot up from $3,000 per ton to $5,000 in December. The Shanghai Containerized Freight Index was up16% week-on-week in mid-January, up 114% since December. Reuters

Further, ocean freight insurance companies have begun issuing war premiums of $50 or more per cargo ton, adding to voyage invoice costs and ultimately, cost of product, and in addition to longer voyages and higher costs, disruptions to scheduled arrival times will drive congestion at destination ports and some equipment shortages, as empty containers and mis-timed arrivals disrupt normal port operations. Seko Logistics, Freightways In better news, US Federal Reserve policymakers concluded in December that inflationary pressures were easing and that the job market was cooling. In response, the Fed left interest rates unchanged for the third straight time and signaled they expect to cut rates 3 times in 2024. Canada’s inflation status mirrors the US at 3.1% in early January, lower than the full year average for 2023 and when taken with the US rate, generally positive signs for restaurant operators and the businesses that supply them eager for access to investment capital and lowered costs of operation. Reuters, Bank of Canada

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