Shipping Disruptions Impact Relocation
International shipping faces several disruptions heading into 2024, making it hard to forecast how things will play out.
Situation:
While freight rates are lower when compared to the recent past, concerns over rising costs and delays in import shipments are again increasing due to these developing situations:
Middle East – Red Sea
Attacks on cargo ships in the Bab-el-Mandeb Strait of the Red Sea – where about 12 percent of global shipping sails through – have prompted hundreds of cargo ships carrying over 2 million containers to reroute from the Red Sea. Rerouting will result in longer transit times and elevated costs.
Changing a cargo ship’s route from Asia to Europe around the southern tip of Africa, rather than using the Suez Canal in the Red Sea, represents a major detour. For example, a cargo ship’s voyage from Singapore to Rotterdam would be extended by 3,300 miles, a 40 percent increase, adding approximately 10-to-14 extra days in transit and sizeable costs.
With the international community mobilizing to stop this disruption to global trade, it is possible that these ship diversions could end soon, but only time will tell.
Central America – Panama Canal
Simultaneously, the 50-mile-long Panama Canal – which 5-to-6 percent of global shipping flows through – has had a 33 percent capacity reduction due to a drought, posing challenges in the shipping bottleneck area. Ships moving through the canal have faced wait times of up to three weeks. Delays are expected to continue until April / May 2024, when the rainy season is expected to raise the low water levels and end the region’s drought.
North America – US Mexico Border and West Coast Ports
Congestion of freight traffic at the Mexico-U.S. border is escalating and likely to continue its upward trend. This increase stems from the U.S. actively suspending freight train services across the border to counter unauthorized migrant crossings. The resulting shift from rail to truck transport for containers could significantly impact freight capacity, costs, and transit durations.
Both shippers and the broader supply chain should remain attentive to the potential recurrence of increased activity and congestion at major U.S. west coast ports next year due to an anticipated surge in cargo from Asia to U.S. East Coast. This surge could strain trucking services and create logistical delays similar to those experienced during the pandemic.
What You Can Do
Companies should look for rate increases and a potential rise in incremental costs due to delayed shipments (e.g., temporary housing), as well as increased stress from relocating employees who will have to wait longer than expected for their goods.
If NEI is not managing your international shipments, we recommend:
- Budgeting for additional freight rates in your cost estimates
- Working with partners to develop processes that include verification that freight increases are genuine
- Questioning rates that are much lower when compared to the overall market; which is often an attempt to lock in business with large increases coming without warning
NEI Guidance
Be prepared for these shipping trends to continue. Consider reasonable policy changes going forward, like the following:
- Allowing exceptions specifically due to continued and new shipping disruptions in 2024
- Setting new expectations with relocating employees
- Considering alternative policy options for shipping international household goods
NEI remains committed to managing client costs for every move. Our Client Relations Managers will collaborate with each client to identify the most cost-effective options for international household goods shipping. They will also discuss providing a small allowance to employees for the extended transit period without their goods.
In Summary
NEI and our service partners will keep you posted on this developing situation, but if you would like to discuss policy changes or options to reduce global container shipment costs, please reach out to your NEI representative or Mollie Ivancic, NEI’s VP, International Services.
This material has been prepared for informational purposes only and is not intended to provide, and should not be relied on for tax, legal or accounting advice. Please consult your own tax, legal and accounting advisors before engaging in any transaction.
Shipping Disruptions Impact Relocation
International shipping faces several disruptions heading into 2024, making it hard to forecast how things will play out.
Situation:
While freight rates are lower when compared to the recent past, concerns over rising costs and delays in import shipments are again increasing due to these developing situations:
Middle East – Red Sea
Attacks on cargo ships in the Bab-el-Mandeb Strait of the Red Sea – where about 12 percent of global shipping sails through – have prompted hundreds of cargo ships carrying over 2 million containers to reroute from the Red Sea. Rerouting will result in longer transit times and elevated costs.
Changing a cargo ship’s route from Asia to Europe around the southern tip of Africa, rather than using the Suez Canal in the Red Sea, represents a major detour. For example, a cargo ship’s voyage from Singapore to Rotterdam would be extended by 3,300 miles, a 40 percent increase, adding approximately 10-to-14 extra days in transit and sizeable costs.
With the international community mobilizing to stop this disruption to global trade, it is possible that these ship diversions could end soon, but only time will tell.
Central America – Panama Canal
Simultaneously, the 50-mile-long Panama Canal – which 5-to-6 percent of global shipping flows through – has had a 33 percent capacity reduction due to a drought, posing challenges in the shipping bottleneck area. Ships moving through the canal have faced wait times of up to three weeks. Delays are expected to continue until April / May 2024, when the rainy season is expected to raise the low water levels and end the region’s drought.
North America – US Mexico Border and West Coast Ports
Congestion of freight traffic at the Mexico-U.S. border is escalating and likely to continue its upward trend. This increase stems from the U.S. actively suspending freight train services across the border to counter unauthorized migrant crossings. The resulting shift from rail to truck transport for containers could significantly impact freight capacity, costs, and transit durations.
Both shippers and the broader supply chain should remain attentive to the potential recurrence of increased activity and congestion at major U.S. west coast ports next year due to an anticipated surge in cargo from Asia to U.S. East Coast. This surge could strain trucking services and create logistical delays similar to those experienced during the pandemic.
What You Can Do
Companies should look for rate increases and a potential rise in incremental costs due to delayed shipments (e.g., temporary housing), as well as increased stress from relocating employees who will have to wait longer than expected for their goods.
If NEI is not managing your international shipments, we recommend:
- Budgeting for additional freight rates in your cost estimates
- Working with partners to develop processes that include verification that freight increases are genuine
- Questioning rates that are much lower when compared to the overall market; which is often an attempt to lock in business with large increases coming without warning
NEI Guidance
Be prepared for these shipping trends to continue. Consider reasonable policy changes going forward, like the following:
- Allowing exceptions specifically due to continued and new shipping disruptions in 2024
- Setting new expectations with relocating employees
- Considering alternative policy options for shipping international household goods
NEI remains committed to managing client costs for every move. Our Client Relations Managers will collaborate with each client to identify the most cost-effective options for international household goods shipping. They will also discuss providing a small allowance to employees for the extended transit period without their goods.
In Summary
NEI and our service partners will keep you posted on this developing situation, but if you would like to discuss policy changes or options to reduce global container shipment costs, please reach out to your NEI representative or Mollie Ivancic, NEI’s VP, International Services.
This material has been prepared for informational purposes only and is not intended to provide, and should not be relied on for tax, legal or accounting advice. Please consult your own tax, legal and accounting advisors before engaging in any transaction.
