Logistics Market Update December 2024

Logistics Market Update December 2024

Monthly Highlights

  1. Proposed Legislation Targets China Imports


    New legislation introduced in the U.S. would require 10% of all imports from China to be transported on U.S.-flagged ships. This move aims to bolster domestic shipping industries but could also lead to higher costs and potential supply chain disruptions for companies relying heavily on Chinese goods. Stakeholders are closely monitoring the potential impact on global shipping dynamics.

          Source: FreightWaves

  1. Port Strike Threat Boosts Trans-Pacific Rates


    The looming threat of port strikes on the U.S. West Coast has led to a surge in trans-Pacific container rates. Shippers, seeking to avoid disruptions, have turned to alternate routes, driving up costs. Spot rates on the trans-Pacific route increased by nearly 15% in the last month alone, highlighting the ripple effects of labor tensions on global shipping.

          Source: FreightWaves

  1. Global Trade Routes See Major Shifts


    Recent ocean and airfreight data reveal significant changes in global trade patterns. With geopolitical tensions and new trade agreements reshaping demand, traditional routes are being replaced by emerging ones. These shifts are creating opportunities for new logistics hubs but also pose challenges for companies needing to adapt quickly.

           Source: Air Cargo Week

Key Takeaways

  • Proposed U.S. Legislation on China Imports: The new requirement for 10% of Chinese imports to move on U.S.-flagged ships could lead to increased shipping costs and supply chain adjustments, creating challenges for companies dependent on imports from China.
  • Trans-Pacific Rate Surge: The fear of U.S. port strikes caused trans-Pacific container rates to rise nearly 15% as shippers rerouted cargo to avoid potential disruptions. This reflects the significant impact labor uncertainties have on global shipping costs and operations.
  • Global Trade Route Shifts: Changes in ocean and airfreight patterns, driven by geopolitical and economic factors, are creating new logistics opportunities but also pressuring companies to adapt quickly to evolving trade dynamics. Traditional routes are being replaced by emerging alternatives, reshaping the global trade landscape.

Ocean Freight Market Update

Rate Trends and Capacity Adjustments

  • Freight Rates: As of December 2024, ocean freight rates remain significantly higher than the same period last year. The Shanghai Containerized Freight Index (SCFI) indicates year-over-year increases of +255% to Europe, +245% intra-Asia, +147% to the U.S. West Coast, +128% to Oceania, and +96% to South America.
  • Capacity Outlook: The idle fleet of containerships has reached an all-time low of less than 1% in 2024, with larger ships of 12,500+ TEU showing almost no idling. Annual dry container production could reach 7.3 million TEU, surpassing previous years with a 6.5% year-over-year growth.

Market-Specific Insights

  • North Europe and Mediterranean: Rates have declined further as peak season demand subsided, and shipping lines compete aggressively on these routes.
  • Asia-U.S. West Coast: Despite the rush to bring forward U.S. imports due to potential new tariffs, Transpacific freight rates have shown slight decreases. Several carriers have announced new rates starting December 1st in anticipation of the pre-Chinese New Year rush.
  • South America: Rates remain much higher than the same time last year, with a 96% increase year-over-year.

Environmental and Compliance Developments

  • IMO 2024 Regulations: The implementation of stricter International Maritime Organization (IMO) 2024 environmental regulations has prompted some carriers to upgrade fleet technologies. However, the associated costs are expected to reflect in long-term freight rates.
  • EU Emission Trading System (ETS): The share that carriers need to surrender for their emissions under the EU ETS is increasing to 70% from January. Additional ETS surcharges are expected in 2025.

Congestion and Reliability

  • Schedule Reliability: Global schedule reliability has improved marginally, reaching 60%. However, challenges such as port congestion and vessel delays persist. Carriers have responded with better planning and adjusted port rotations, but these improvements have not yet significantly alleviated supply chain disruptions.

Air Freight Updates

Peak Season Performance

  • Demand Surge: The holiday shopping season has driven an uptick in air freight demand, especially for e-commerce and consumer electronics shipments.
  • Capacity Constraints: Limited aircraft availability due to maintenance backlogs and crew shortages has led to tighter capacity.
  • Rate Increases: Global spot rates have surged, with some high-demand routes experiencing double-digit percentage rate hikes

Region-Specific Developments

  • Asia-Pacific: Strong demand for electronics shipments has pushed rates higher, particularly on trans-Pacific lanes.
  • Europe: Airlines are facing capacity shortages due to increased demand for automotive and high-value industrial parts, contributing to regional rate increases.

Disruptions and Delays

  • Weather Events: Recent hurricanes have disrupted air cargo operations, causing shipment delays and congestion at key airports in affected regions.
  • Geopolitical Tensions: Conflicts in various regions have disrupted air freight routes, forcing carriers to reroute flights, leading to extended transit times and increased costs.

Technological Advancements

  • Cargo Tracking Systems: Airlines continue to adopt advanced cargo tracking systems, offering better visibility and improved service levels for high-priority shipments.
  • Drones for Last-Mile Deliveries: Some carriers are testing drones for last-mile deliveries in remote areas, showcasing future possibilities for e-commerce logistics.

Freight Market and Amazon News

New U.S. Legislation on Chinese Imports

New U.S. legislation mandates that 10% of Chinese imports must be transported on U.S. ships, impacting the global shipping market and trade routes.
Source: FreightWaves

Amazon’s Price War Against Chinese Sellers

Amazon is targeting Chinese sellers offering low-cost goods on platforms like Temu, intensifying competition and shaping pricing strategies for global sellers.
Source: TechNode

Amazon Requests Price Adjustments from Chinese Sellers

Amazon has urged Chinese sellers to avoid offering prices lower than those on rival sites,marking a shift in pricing dynamics for global e-commerce.
Source: SCMP

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