Lumber shipping companies saw that their trends year over year have begun to revert back to how traditional markets have been in the past, but they hold a cautious optimism as geopolitical factors can easily affect the supply chain strategies. One shipper noted, “We slowly saw the industry normalize over the last 12 months and it is back to pre-pandemic levels. I do not foresee any substantial increases in our export shipments over the next 12 months.”
Despite seeing their markets slowly return to the traditional trends, a lumber shipper remarked, “Asking me to predict shipping volumes in the first quarter of 2024 is akin to throwing spaghetti at the wall and seeing ‘what sticks.’”
A shipper stated, “The only constant across all industries is that margins are being squeezed. Going into the New Year, we can all be hopeful that the economy starts to pick back up, but I am not sure that is what we will see.”
Peter Lovett
King City Forwarding USA, Inc.
Chesapeake, VA
As we sail into 2024, the ocean transportation industry is experiencing a sea change in trends that are reshaping the way goods are moved across the globe. These shifts are not only altering the dynamics of maritime commerce but also necessitating innovative strategies to address supply chain challenges. I would characterize 2023 as the “correction” year in the ocean freight market where we saw significant reductions in export and import freight rates across all trades.
There was an overall decline in ocean freight demand globally caused by a slower economy, as governments across the world managed inflation. Overall, the supply chain experienced better fluidity in 2023, with the alleviation of port congestion on the East and West coast, which resulted in more reliable shipping schedules. Even with ports clear of congestion, service reliability remains an issue, not having reverted to pre-COVID levels.
Due to overcapacity and carriers’ aggressive response, it will likely not return to normal levels in 2024. Global container ship scheduled reliability stood at 64.4 percent in October, up from 51.8 percent a year earlier and approximately 35 percent in 2021. The October figure was still 15 percentage points below 2019 levels, and with no sign of improvement since May, according to Sea-Intelligence Maritime Analysis. To manage the impact of overcapacity primarily driven by the influx of newly ordered vessels entering the market, carriers are pulling out all the tricks to absorb capacity.
They have many tools at their disposal, whether it’s blank sailings, cancelling or suspending entire service loops, further slow steaming, laying up ships or taking longer routes. While all that will combine to help carriers weather a rough patch of unfavorable supply-demand economics, it undermines schedule integrity and service reliability.
The disruptions caused by the COVID-19 pandemic highlighted the fragility of global supply chains. In response, the ocean transportation industry is focusing on building resilience. This involves diversifying supply chain sources, adopting agile logistics strategies, and investing in redundant systems to mitigate risks and ensure the uninterrupted flow of goods. The maritime industry is embracing digitalization at an unprecedented pace. From smart containers with real-time tracking capabilities to blockchain-based documentation, technology is streamlining operations, reducing inefficiencies, and enhancing overall transparency.
2023 was also marked by longshore labor disruption. The International Longshore and Warehouse Union (ILWU) flexed its power on the West Coast of both the U.S. and Canada. Montreal port workers and employers have hit an impasse in contract negotiations, bringing back memories of a five-day strike in 2021 and a 19-day strike in 2020 at Canada’s second-largest port. And the International Longshoremen’s Association (ILA) has already raised the prospect of a strike at U.S. East and Gulf coast ports after its contract expires at the end of September 2024, the first time that would happen since 1977.
Sustainability has taken center stage in the maritime sector. With increasing awareness of environmental issues, there is a growing emphasis on adopting eco-friendly practices. Shipowners are investing in green technologies, including alternative fuels, wind-assisted propulsion, and energy-efficient designs, to reduce the carbon footprint of ocean transportation. Regulatory bodies are also tightening environmental standards, pushing the industry towards more sustainable practices.
The push for sustainable shipping practices is expected to gain even more momentum in 2024. Governments, consumers and industry players are likely to collaborate further to implement stricter environmental regulations. The adoption of alternative fuels, such as hydrogen and ammonia, is expected to increase, and more vessels will incorporate green technologies to meet evolving sustainability standards, such as the EU Emission Trading System (ETS) surcharges from carriers.
Looking ahead to 2024, the industry is poised for further transformation, driven by a collective commitment to efficiency, sustainability and adaptability. The key to success lies in embracing change, leveraging technology, and forging strategic partnerships to sail through the challenges and opportunities that lie on the horizon.
I would like to take this opportunity to wish everyone in our industry a healthy and prosperous 2024. Thank you all for your continued support through out the years.
As we bring in 2024 a little advice on progress from Mr. Lincoln: “I’m a slow walker but I never walk backwards.”
Stephen A. Zambo
The AGL Group
Jacksonville, FL
2023 was a very interesting year. There are trends within the marketplace that we see year over year, decade over decade. The trends may have some variability, think COVID, but outside of that, trends have remained relatively spot on over the long term.
In 2023, we saw the first quarter buck normal export trends. We typically see a slow January and February with freight picking up in March. This past year we saw a very strong first and second quarter. Export volumes took a large hit from June all the way through about October in 2023. That is more in line with how traditional markets have been in the past.
In 2023, the supply chain issues were nothing in comparison to 2021 and 2022. 2023 has been stable. Trucking availability has been a non-issue and steamship lines on most lanes have availability. Of course, this fluctuates from time to time, but rarely is a booking more than two weeks out as it stands. One item to keep an eye on is a potential strike on the East Coast sometime in 2024.
After negotiating record deals on the West Coast, the union on the East Coast is saying that it will hold firm by striking in 2024 if there is not a new deal negotiated. That would be a very large issue for the forest products industry as 80 percent of hardwood exports are routed via the East Coast. Until there is more concrete information and the date of strike approaches, this is something to monitor.
A very important topic no one talks about when looking forward at freight rates is the amount of steamship line capacity coming onto the market in the next 18 months. On average there are about 375,000 containers worth of new space entering the market annually. In 2024 alone there is north of 1,200,000 containers worth of new ship builds coming online. Unit economics lead us to the obvious conclusion of continued cheap freight rates. More space with the same demand equals low freight rates. More space with less demand equals low freight rates. I am confused as to what the steamship line carriers are doing from a unit economics standpoint.
At the end of 2023, we were back to enjoying historically low freight rate levels. The rates have no where to go but up. I do not believe we will see large increases, 10-15 percent over the course of 2024 on the ocean carrier side. Trucking companies on the other hand are having a very challenging time. There is less freight both on the export and import side, with more trucking capacity leading to reduced trucking rates over the last six months. I believe you will see some companies reduce fleet size, close their doors or start to increase prices. They do not have an option.
Containers are readily available at the ports and are not readily available at some inland locations. I expect this trend to remain as it typically does. The cost of containers are stable for now, and may increase over the next year or so by about 10-15 percent.
Shipping volumes in the fourth quarter were higher than what we forecasted based off of the second quarter and the third quarter. Economists and banks are calling for around 2 percent global growth in 2024. If that actually happens, we will see modest gains in export volumes, however, I am not so certain that we will actually see 2 percent growth. Asking me to predict shipping volumes in the first quarter of 2024 is akin to throwing spaghetti at the wall and seeing “what sticks.”
Where the economy goes is anyone’s guess. We are heading into an election year with much uncertainty. There are currently multiple wars globally, interest rates have been elevated compared to the last decade and inflation has been a major issue. The only constant across all industries is that margins are being squeezed. Going into the New Year, we can all be hopeful that the economy starts to pick back up, but I am not sure that is what we will see.
Curtis Struyk
TMX Shipping Co., Inc.
Morehead City, NC
Even though the pressures and bottlenecks that the transportation industry was experiencing in 2022 have subsided, our export numbers have decreased. Our lumber and log shipments overall are down 20 percent year over year.
We slowly saw the industry normalize over the last 12 months and it is back to pre-pandemic levels. I do not foresee any substantial increases in our export shipments over the next 12 months. Ongoing changes in global trade dynamics, regulations and geopolitical situations can influence supply chain strategies. Business may need to stay agile and adapt to evolving trade environments.
Transportation rates are back to the levels we saw in 2019 and I do not see anything in the near future that is going to change that other than some global event such as natural disasters, geopolitical issues or pandemics.
We are not currently seeing any real shortages in ocean containers at the major ports but we are seeing spotty shortages at some of our inland locations because of the decrease in imports replenishing those container pools.
We saw a little uptick in shipments in the fourth quarter over the third quarter since the log season got off to a decent start. All indications are we should have a good log season that will carry into late spring 2024.
The U.S. Federal Reserve plays a crucial role in managing inflation and interest rates. Changes in these factors can influence borrowing costs, spending and investment. Consumer spending is a significant driver of the U.S. economy. Factors such as consumer confidence, household income and access to credit can impact spending patterns.
The interconnectedness of global economy means that international events, trade relations and geopolitical tensions can have repercussions for the U.S. economy and U.S. exports. China still accounts for 50 percent of our lumber and log exports. When half of our business is reliant on China and given the current tensions between the two countries, it makes us very concerned about our future.
