TPM24 Insights and US Retail Forecast Signal Strong Market Trends

This week’s market update highlights key developments shaping the logistics industry, focusing on capacity stability, evolving trade strategies, and resilient market demand. Despite ongoing disruptions in the Red Sea, capacity balancing on major trade routes remains stable as carriers deploy additional vessels. We also share insights from the TPM24 conference, where trans-Pacific contract negotiations and strategies for the coming year took center stage. In addition, upward revisions to US retailer import forecasts signal market resilience and increased demand in 2024. Explore these updates, including trends in transloading strategies, inland port growth, and the global economic outlook, as we continue to navigate a complex and evolving shipping landscape.

Capacity Balancing on Major Trades

• Ongoing attacks on commercial shipping in the Red Sea, diverting vessels around the southern tip of Africa, are not expected to disrupt the capacity-demand balance on major east-west trade lanes (Asia-Europe and Asia-North America).
• Carriers have deployed additional vessels to compensate for the effective capacity loss resulting from longer transit times due to the route diversions from Suez to CGP.
• The ongoing situation in the Red Sea is unlikely to significantly impact shipping rates and capacity on major trade routes such as Asia-Europe and Asia-North America, maintaining a relatively stable balance.
• the removal of a few hundred Panama surcharge by several shipping lines, effective earlier in January, adds to the ongoing transformations in the maritime logistics landscape.
• The introduction of new services will also contribute to the overall capacity of the market.
• Hede Shipping: Domestic trade carrier based in Hebei province, operates bi-weekly routes from Shanghai to LAX via WBCT, with an ETD every Thursday, a transit time of 13 days, and a fleet comprising two vessels (4250 TEU and 3750 TEU), initiating its first sailing BFAD ATLANTIC 2401E on 3/21.

Anticipating the Next Contract Year: Fundamentals, Pricing, and Strategy

• The TPM24 conference in Long Beach marks the initiation of negotiations for trans-Pacific trade lane contracts, covering various container cargo starting on May 1.
• Houthi missile and drone attacks prompt container carriers to reroute vessels around Africa, leading to a surge in spot rates.
• The FIXED vs. FAK space ratio is crucial for freight forwarders, adjusted based on past performance and market judgment, though more relaxed this year given market fundamentals.
• Surcharge and container-free period terms remain relatively unchanged from the previous contract.
• FIXED prices are crucial for large BCOs, forming the basis of logistics costs; despite market fluctuations, they offer stability for FOB direct customers.
• Post-TPM negotiations indicate a not-high opening from shipowners, with consensus expected efficiently, suggesting agreement on future trends after the Red Sea crisis.
• The industry anticipates a return to normalization after the Red Sea crisis, and stakeholders gather post-TPM for further negotiations.
• Shippers are cautious about negotiating contracts at peak rates, considering warnings from carriers like Maersk about new ship deliveries exacerbating oversupply and limiting charge potential.

US Retailer Forecast

• Market researcher advised US retailers revise their import forecasts for H1 2024 upwards by 7.8%, signaling resilience in international supply chains.
• Strategic investments in technology, infrastructure, and partnerships are suggested by the upgraded forecasts, highlighting a commitment to enhancing efficiency.
• The positive forecast revision reflects market confidence and a favorable economic outlook.
• Upward revisions suggest an anticipated increase in shipping demand, influencing both freight rates and vessel capacity.

We’ve also gathered important insights from the recent TPM24 conference

Global Instability Threatens Maritime Trade

• Red Sea attacks halt commercial shipping, posing a significant threat.
• Heightened tensions in the South China Sea contribute to global instability.

Economic Growth Amidst Inflation and Conflict

• Positive outlook for US and global economies in early 2024.
• Concerns about inflation and global conflicts impacting economic forecasts.
• S&P Global lifts its US real GDP growth forecast due to accelerating growth.

Chassis Provider Prepares for Import Surge

• TRAC Intermodal invests in chassis fleet, tracking technology, and US inland markets.
• Accelerated investment of $490 million since June 2020 to address supply chain disruptions.
• Readiness for the next surge in imports highlighted at TPM24 conference.

Transloading Strategies Shaping Industry Dynamics

• Changing shipper strategies increase demand for transloading services.
• Traditional transloaders and new entrants like LTL carriers see rising demand.
• Logistics technology enables transloading to fine-tune and manage inland cargo flow.

Skepticism Over Gemini Cooperation’s Operating Model

• Gemini Cooperation’s proposed hub-and-spoke model faces skepticism.
• Ambitious 90% schedule reliability target questioned by industry participants.
• Historical mistrust of transshipment influences skepticism at TPM24 conference.

Inland Ports’ Potential Growth with Haulage Model Changes

• Inland ports in the southeast US experience double-digit volume growth.
• Potential for further gains if ocean carriers adopt door moves (carrier haulage).
• Highlighted cases of Georgia’s Appalachian Regional Port and South Carolina’s inland terminals.

Industry Trends