The effect on the bottom line varies greatly by shipping sector. The three major U.S. courier companies, FedEx, UPS and DHL Express are still operating in Tel Aviv and Israel, with only UPS issuing an official statement that they have temporarily suspended operations in southern Israel. Container ships are hardly affected, whereas crude oil and natural gas are seeing a more immediate impact. 

Breaking it down into simple terms: energy prices are rising, leaving air cargo in a vulnerable position, on top of the security concerns for air travel. 

“The major fear,” according to Edward Hardy of Air Cargo Week, “is that the conflict could lead to a similar situation to that of 50 years ago, when the Yom Kippur War sparked an unprecedented global oil crisis that lasted for months.” The average price for a barrel of crude oil has jumped $20 since July, hovering at $92 at the time of writing. A perfect storm of oil prices could be brewing, as we noted last year following Russia’s invasion of Ukraine. Saudi Arabia was voluntarily cutting their oil production even before Hamas’ October 7 attack.

There are questions on everyone’s mind, but few linger larger for international trade than the status of the Suez Canal. The 120-mile long waterway connects the Mediterranean Sea to the Red Sea, essentially Europe to the Middle East. The Suez Canal is also in the unique position where, as integral as it is to global commerce, the less you hear about it, the better. 

Egypt fully controls the Suez Canal and, at the moment, it would be unlikely for service to be stopped. The Egyptian border has been in many discussions, culminating when it briefly opened to bring in humanitarian aid to Gaza on October 21. While all parties have little interest in closing the canal at the moment, there is precedence for disruption. In 1956, Israel, France and the United Kingdom invaded Egypt following the nationalization of the Suez Canal Company, leading to the canal being closed for five months. The Suez Canal would be closed again from 1967-1975 in response to Israel’s incursion into Egypt during the Six-Day War.

Any stoppage in the Suez Canal would have a major effect on oil prices. 9% of global seaborne crude travels through the canal. Vessels have the option to travel around the southern tip of Africa, but this would raise costs and extend timelines.

China is looking to bounce back from their extreme methods of dealing with the coronavirus pandemic. However, recovery is significantly slower and, in some places, virtually non-existent. This is due to numerous factors; some external and some of their own design.

The first red flag, as noted by Visual Capitalist, is GDP growth. Previously averaging 9% annual growth over the past four decades, GDP expanded by a minuscule 0.8% during Q2. This was down from the already low 2.2% in Q1. Exports have diminished for several months in a row, an unsurprising result of a tight global economy created by inflation and slowed consumer spending. There is always hope for a strong end of year performance brought on by the holiday season. A miracle Q4 that could pump fresh life into the Chinese economy seems more unlikely by the day.

As always, with China, it is worth noting the cloudiness that surrounds numbers coming out of the Middle Kingdom. In June, youth unemployment (ages 16-24) hit a record high of 21.3%. Though there is no evidence, it can be presumed that that number has risen even further as the Chinese government has suspended reporting of this data under the guise of re-evaluating their collection methods.

The global markets are reacting quickly to China’s misfortunes. The yuan conversion rate to the U.S. dollar reached a 16-year-low in August. This is surprising to some economists who recently theorized that BRICS currency could rise to threaten the dollar. While China is still projected to outpace the United States, they will not be leading the charge in speed of GDP growth. That honor will lie with India, the world’s most populous country and one that is expected to climb the global rankings to third largest GDP by 2050.

There is significant optimism surrounding the future of India. Fears of a recession have rescinded slightly since the start of the year and, despite economic uncertainty and rising oil prices, the Indian economy is expected to steadily rise in both the short- and long-term. While not emerging as a dominant force, India grew by 6.1% last quarter. When compared to China’s sluggish growth, mentioned earlier, it is easy to see why there is confidence in India.

India’s demographics also give economists confidence. The median age in India is 28 years, versus 38 in the United States and 39 in China. Other countries, like Bangladesh and the Philippines, have lower median ages, indicating a larger workforce for years to come. 

The Panama Canal is a water bridge that lets ships travel between the Atlantic and Pacific Oceans without having to sail through the Drake Passage below South America. It’s a shortcut that saves time and money. As the quickest route between the Atlantic and Pacific Oceans, the Panama Canal is a crucial thoroughfare for international shipping. 

Unlike the Suez Canal, the Panama Canal isn’t a straight trench through the land. It is a series of locks and gates with a large lake in the middle, known as Gatun Lake.

Locks are essentially water elevators. Ships enter chambers and water is either added to raise the ships up or let out to lower them down. This process helps ships climb up and down the land’s natural slope. Each ship that travels the Panama Canal requires 51 million gallons of water from Gatun Lake to make the trip. 

Ships coming from the ocean enter the canal through three locks, steadily rising up until they reach the level of Gatun Lake (85 feet above sea level). Then, ships sail across the lake and go down through a series of locks to the Pacific Ocean. This process takes roughly 10 hours for a ship to get through the Panama Canal.

Opened in 1914, the Panama Canal is an incredible feat of engineering. However, as we are now seeing, the creative solution to carrying ships over the hilly jungles of Panama is dependent on more than just human ingenuity to work.

It has been a busy year for the canal. Typically, the Panama Canal sees 40 ships pass per day, or nearly 15,000 per year. However, just before the close of the 2023 fiscal year, the authority in charge of the canal reported 800 more vessels had crossed than their annual budget had forecasted.

While droughts are not unprecedented in the Panama Canal, this is the lowest total rainfall since 2000. Extreme weather events have been spurred on by the onset of El Niño, a weather pattern that refers to the warming of surface waters in the tropical central and eastern Pacific Ocean. El Niño effects usually peak in December, just a few months away.

The last four years have been a bumpy ride for air cargo. Following the onset of the Covid-19 pandemic, total revenue peaked at $204 billion in 2021. That was nearly twice the total tallied in 2019. Rising inflation has hampered the meteoric rise. The market contracted slightly by $13 billion, yet still hit the second best year ever, in 2022.

It’s worth noting that, despite the increase in revenues, volume is projected to end 2023 at 63.7 million cargo ton kilometers—5.5% below 2019 levels. Cargo ton kilometers, known as CTK, is an industry standard statistic found by multiplying the cargo’s weight by total distance traveled. 

So what exactly is taking up all this volume?

Air cargo is split up into two categories: general cargo and special cargo.

General cargo refers to most consumer goods, such as dry goods, hardware, and textiles. Electronics like mobile phones, tablets, and laptops are a notable exception to general cargo.

Special cargo will require specific documentation and handling during transport. This category includes live animals, wet cargo, perishable cargo, time and temperature sensitive products, like pharmaceuticals, and dangerous goods. Dangerous goods refers to explosives, gasses, flammable liquids, and more. Some substances cannot be transported via air, while others cannot be flown in planes with any other goods.

As previously mentioned, Hong Kong is the busiest airport in the world. Four of the top ten are located in China and one, Tokyo, is in Japan. Hong Kong welcomed 71.4 million passengers in 2019, making it the 13th busiest passenger airport in the world. It has not cracked the top 50 since then, due in no small part to China’s zero-Covid policy. Despite this, Hong Kong retains its number one spot for cargo and has an ultimate capacity of 7.4 million tons.

The other five are in the United States. It might be surprising to learn that the busiest airports in the United States are Louisville, Memphis, and Anchorage. 4.2 million passengers landed in Louisville during 2019—but compare that to the 3.2 billion tons of cargo, freight, and mail during the same time period. Take it one step further with Memphis weighing 4.7 million tons, thanks to FedEx’s spoke-and-hub system.

A notable factor in the decrease in ocean shipping rates is the discrepancy between spot-rates and long-term contracts. 

Simply put, when a shipper or freight forwarder wants to book cargo on a container ship, they will approach multiple carriers to see who can offer the best rate. The quote from the carrier will be locked in for a short period of time; long enough for the freight forwarding company to confirm details and logistics, but relatively short in the world of international shipping. This is why there can be more volatility in spot-rates, since they are determined closer to real time than long-term contracts.

Any company, regardless of size, can take advantage of the lower rates of long-term contracts through Sheltered International’s managed transportation service. This will ensure rates are valid for a longer period of time, typically one year, to cover your most important routes with space reserved each month.

Earlier this year, when spring contract negotiations stalled and general demand was weak due to inflation, shippers switched a much higher percentage of their business to spot-rates. However, following the conclusion of negotiations in late spring, industry experts are able to confirm that the decrease in long-term shipping rates is more than a passing trend. Additionally, delivery of new container ships is constantly increasing the volume available for shippers.

Long-term contracts provide stronger value and stability, but they are only viable for companies with large volumes. This is part of the reason you won’t see massive price swings at retailers, even when shipping rates go on a roller coaster ride, as they have for the past several years. 

This sentiment is echoed by Jason Miller, an associate professor at Michigan State University, who cautions, “the American consumer should not be expecting that this is going to lead to massive price relief. That’s just not going to happen.” 

This feeling is exacerbated by the regular summer slowdown and inflation that has been hitting consumers hard. However, forecasters predict that inflation will actually be below the historical average in July 2023, down nearly 7% from its peak of 9.1% during the height of the pandemic. This is good news for businesses and consumers alike ahead of the holiday season, but similar to the stock market, costs will never go all the way down. 

Shippers can be excited about this news regarding lower long-term ocean shipping rates. “There is a sense of payback-time in the market after the COVID years, where carriers have been in absolute control,” says Peter Sand, chief analyst of Xeneta. 

Often the most important factor in any business decision is cost, so let’s start there. If you are moving goods around town or within a small region, it is likely that shipping by truck will be both more cost effective and efficient.

When the distance between starting and end point grows, the scales tip towards train shipping. The difference is most notable for cross-country routes.

Don’t forget that if you ship by rail, you will likely need to plan for a truck to deliver your goods from the train depot to its final destination. This is known as “last mile” delivery.

When it comes to reliability, both train and truck shipping have unique advantages. Trains, for instance, are less prone to traffic delays and can operate in virtually any weather conditions, making them a reliable choice for long-distance or cross-country shipments. Their ability to carry large volumes of goods at once also makes them a dependable choice for bulk shipping needs. On the other hand, trucks often boast door-to-door service, meaning goods can be transported directly from the warehouse to the customer’s doorstep without any intermediaries. This can significantly decrease the chance of shipment delays or mishandling.

When considering flexibility, trucking shipping often comes out on top. Trucks provide the option of changing delivery routes and schedules in real-time based on road conditions, traffic, or changes in the customer’s availability. This flexibility can be crucial for time-sensitive shipments or for businesses with rapidly evolving needs. Trains, while excellent for scheduled, repetitive, and large volume shipments, have less flexibility. Routes and schedules are largely fixed and cannot be easily changed.

The ILWU and the BCMEA are at loggerheads over the use of third-party contractors to maintain machinery and equipment. The BCMEA is concerned that the ILWU is attempting to “aggressively expand” its control over maintenance beyond previous contracts. Interestingly, the ILWU shared in a separate statement that their authority has been “aggressively eroded”. 

7,400 terminal cargo loaders at more than 30 ports in British Columbia are affected by the strike. This includes Canada’s busiest port, Vancouver, and the third busiest port, Prince Rupert. Experts estimate the strike will cost between $250 million and $350 million per day; this is off projections from the more than $2.5 billion annually added to Canada’s GDP by the Pacific ports. 

As of this writing, negotiations are paused. Seamus O’Regan, the Canadian Labor Minister, has called for the ILWU and BCMEA to resume talks. While both sides say they are ready to return to the negotiating table at a moment’s notice, they believe they are too far apart on a deal to continue good faith conversations. It is possible that a solution will require the input from the federal government.

As we have seen previously, disruptions in Canada trickle down quickly to the United States. A large share of US cargo, especially to Chicago and the Great Lakes region, passes through the Vancouver and Prince Rupert ports.

Retailers are concerned about the impact of the strike on back-to-school and (yes, already) holiday shopping. Shipments can be diverted through Mexico and to East Coast alternatives, but extended travel times are expensive, both in time and money.

Here at SiShips, we are monitoring the situation closely. We have checked, and continue to watch, for any shipments that may be affected and are proactively notifying clients to offer the most cost-effective and efficient solutions. Clients can also stay up to date with their shipments through our complimentary mobile app.

The journey of this enormous, remote, and inhospitable piece of land becoming one of the United States’ most prized assets is long and complex. In 1867, Secretary of State William H. Seward purchased Alaska from Russia for $7.2 million. At the time, this deal was nicknamed “Seward’s Folly” and it would not be until 1959 that Alaska entered the union as the 49th state. 

In 2023, Alaska is looking to modernize the busy Port of Alaska in Anchorage. The project is budgeted for $200 million, which could rise with federal infrastructure funding. The United States is not the only country looking to expand their influence in the region. Russia uses Arctic shipping routes to transport liquefied natural gas and oil tankers. With the increasing effects of climate change causing Arctic ice to melt, these routes are becoming more accessible, allowing for quicker and more cost-effective shipping. It is worth noting that even with a shrinking Arctic ice pack, experts believe these will be supplemental routes only accessible during the summer months.

Alaska is not just about ocean transportation. Though few commercial passengers land on the tarmac, the Anchorage International Airport is the second busiest cargo airport in the United States (behind Memphis, thanks to FedEx’s spoke-and-hub system) and the fourth busiest cargo airport in the entire world. It takes less than 10 hours to fly from Anchorage to 90% of the industrial world.

Alaska is a treasure trove of natural resources. Among these, the oil industry is particularly prominent due to the massive reserves in the state’s northern regions. In the late 1960s, the discovery of large oil deposits at Prudhoe Bay, located in the northern part of Alaska, ushered in a new era of economic prosperity for the state. The Prudhoe Bay Oil Field is the largest oil field in the United States and is home to more than 800 actively producing wells. This discovery led to the construction of a significant piece of infrastructure, the Trans-Alaska Pipeline System, aimed at transporting this precious resource from the remote northern fields to a shipping terminal in the south.

The Trans-Alaska Pipeline, completed in 1977, spans an impressive 800 miles, stretching from the Arctic Ocean at Prudhoe Bay to the Gulf of Alaska at Valdez, the northernmost ice-free port in North America. Today, the pipeline continues to be a vital artery for Alaska’s economy, contributing a significant portion of the state’s revenues and jobs. It plays a major role not only in Alaska’s economy but also in the U.S. energy infrastructure.

The historic peak we are seeing in container ship orders is thanks, in no small part, to the massive agreement recently reached between France and China. In April, the French shipping magnate CMA CGM made a deal with the China State Shipbuilding Corp. in Beijing for 16 container ships at the price of $3.06 billion. This is the largest order in Chinese shipbuilding history, which as a collective, counts for nearly half of all shipbuilding orders across the globe.

To put numbers in further perspective, there have been 8.61 million TEU contracted in the last ten quarters. This matches the amount that had previously been ordered the preceding 30 quarters. Additionally, we have now witnessed an increased order book for ten consecutive quarters. The orders keep coming and there appears to be no sign of slowing down.

One of the most notable aspects of these recent orders for new containerships, apart from the size, is their emphasis on lowering emissions. International trade is an important link for the global economy that provides disparate locations with necessary goods. However, it is estimated that the shipping industry is responsible for 3% of all greenhouse gas emissions. With this knowledge, many of the leading shipping companies are cognizant of their impact and are setting realistic targets in order to combat climate change. 

“57% of the TEU capacity in the order book involves ships with some level of alternative fuels preparation compared to only 10% in the current fleet,” Hellenic Shipping News reports. At the time of writing, the vast majority of containerships use diesel engines while the first ships delivered as part of the current order book will use methanol. Switching engines from diesel to methanol has been a popular idea for energy scientists, especially in China. There are several reasons why methanol is an attractive alternative including the fact that petroleum reserves are shrinking, methanol produces less carbon dioxide, and it is about half the cost of diesel.

Other ships that are being built will have the ability to use low-sulfur fuel oil, high-sulfur fuel oil, liquefied natural gas, and ammonia, in addition to methanol.

An Application Programming Interface, abbreviated as API, is a set of protocols, routines, and tools that allows software applications to communicate with each other. If you use a computer or smartphone, you are likely coming in contact with dozens of APIs every day without even realizing it. One of the most common examples is checking the weather. When you open the weather app on your phone, it “talks” to national weather services through a system of APIs in order to give you the most up to date information. There are similar networks in place when you use a search engine, like Google, to look up the weather. 

APIs can be used to enable communication between different software applications, web services and systems. They allow developers to access specific functionality or data from another application without having to understand the underlying code or infrastructure. Because of this, APIs can be used in a large variety of ways. Airlines or local metro services can use APIs to post pertinent travel updates to popular social media sites. Inventive people can even use APIs to send silly jokes.

You might be wondering how an API can be personalized to help you. 

As a client of SiShips, you have access to thousands of data points for your freight as it moves around the globe. The API will help collate all of these tracking data points into your systems, such as inventory, purchasing or warehouse systems, without logging in to your SiShips portal.

For those of you who have downloaded our app, you are already aware of the ability to quote, book, and track shipments from the palm of your hand. Now, you will be able to track shipment updates directly in your own systems, with the help of SiShips.