Container xChange’s New Year’s Edition Container Market Forecaster sheds light on the escalating geopolitical risks set to reshape the landscape of global trade in 2024.
Majority of shipping professionals surveyed are gearing up to enhance resilience through strategic initiatives like risk assessment and scenario planning, diversification of routes and suppliers and regulatory compliance. The biggest “headache” resulting from geopolitical upheaval is the “associated costs” that they will have to bear on top of the rising operating costs that they have to already face.
“The Red Sea is a vital artery for global trade, which is currently blocked. Thankfully, there are ways to circumvent that artery and keep the global trade moving and therefore, the trade is not stopped. Therefore, the Red Sea situation is acute but not chronic in the long term for the shipping industry,” says Christian Roeloffs, co-founder and CEO of Container xChange. “Any geopolitical unrest has a direct and causal impact on global trade, which results in market volatility. Classic case in point is the Gaza Strip and the resulting actions by Houthis in Jemen. This leads to trade rerouting, ultimately resulting in rising operating costs, delays, and service disruptions.”
- In response to geopolitical risks, shipping professionals are prioritizing risk assessment and scenario planning, diversification of routes and suppliers and regulatory compliance in 2024.
- Many customers are worried about the rising costs resulting from the Red Sea situation like compliance charges, insurance premiums and war risk charges, etc. These additional surcharges will only add to the worries of shippers and forwarders.
- The inclusion of new economies in the BRICS bloc, including Saudi, Iran, UAE, Egypt, and Ethiopia, sets the stage for potential polarization of global trade, impacting geopolitical compliance.
- Despite challenges, 82% of industry professionals acknowledge the importance of technology for resilience in 2024, with predictive analysis and forecasting tools taking center stage.
- Amidst geopolitical developments, sanctions compliance becomes critical for supply chain professionals, adding another layer of complexity to global trade.
- Freight rates will increase in the short to mid-term, but not in the long run as demand and supply is still highly imbalanced with no clear signs of a strong revival.
- There is a host of countries being added in the BRICS block, namely, Saudi, Iran, UAE, Egypt, Ethiopia, while Argentina declined inclusion. BRICS has been viewed as a counterbalance to the Western-led world order.
“What can have a far-reaching and long-term impact on the global supply chain is the BRICS inclusions of more economies,” Roeloffs adds. “If the block starts to increasingly align political decisions and geopolitical stances, then there could be added complexities to the global trade order with rising polarization of global trade. Ultimately this might lead to a situation where one block is not allowed to trade with the other block and eventually, geopolitical compliance becomes more complex and difficult.”