The key question facing the market in the summer of 2024 comes down to this: was it logistics or economic drivers that were behind the first half volume surge that collided with capacity constrained by carriers’ longer transits around Africa, lighting a rocket under freight rates? Logistics drivers would mean the volumes were driven by risk-averse shippers advancing shipments ahead of known risks such as an ILA East Coast strike or heightened tariffs under a second Trump administration? Economic drivers would be everything from restocking, higher personal income, and high costs of travel leading to tangible goods purchases. For sure it’s a combination of both, but if front-loading of shipments is substantial explanation, volumes will slow potentially significantly in the second half, combining with new capacity to let air out of elevated freight rates and easing congestion at Asia hub ports. TPM25 early next year (March 2-5) will be an opportunity to take stock of how the market played out unexpectedly this year and interpret its meaning going forward.

S&P Global Market Intelligence believes volumes have peaked and will slow in the 2nd half (see chart). Already US containerized import growth is slowing; After growing 33% in February and 26% in March versus prior year, total US import container volumes slowed to a moderate 6% pace of growth in April and May. Some ocean carriers told the Journal of Commerce that the slowdown was due less to demand easing than capacity being unavailable. That view is supported by the National Retail Federation, whose latest Port Tracker on July 7 forecast monthly inbound container volume to grow 14.5% year over year in June, 15.5% in July and 13.5% in August before growth eases in the fall. “We’re experiencing the strongest surge in volume we’ve seen in two years, and that’s a good sign for what retailers expect in sales,” said NRF Vice President for Supply Chain and Customs Policy Jonathan Gold. The view is also supported by freight rates which as of July 11 had surged to an historically inflated $7,800 per FEU, according to S&P Global Commodity Insights, as well as shippers complaining about reduced allocations versus contracted space.

But as of early July there were tangible signs the market was peaking, thanks to a burst of new capacity entering the trans-Pacific in July. Forwarders told the Journal of Commerce that they were “getting notifications of [rate] reductions from some carriers,” according to one. Well before volumes kicked into high gear in March and April, carriers-- including Maersk in its Feb. 8 earnings call -- were warning of a glut of capacity hitting the market this year, telling the market not to get overly optimistic about rates despite the sudden withdrawal of 6-7% of global capacity due to the diversions of ships around Africa beginning in December. That is proving true: As of early July, only about 50% of the 3.2 million TEUs of new capacity scheduled for delivery in 2024 had been delivered thus far this year, meaning there are still 211 container ships and 1.54 million TEUs of new capacity still to hit the water in 2024, according to S&P Global Market Intelligence. That is a lot of capacity. Some will be absorbed by an expected slow steaming of ships that currently are racing around Africa to maintain schedules, but will slow down this year as the strings fill in with additional tonnage. The plot thickens!