Our three scenarios for the container shipping sector in 2024

The container shipping industry is facing numerous potential sources of inflation and instability. As a result, it is very likely that that freight rates will be higher in 2024 than they were in 2023.

As 2024 gets under way, it is no exaggeration to say that the climate for the container shipping sector is dire. Bad news is flooding in from every direction, putting the market in an execrable position.

• Freight rates overreacted to the economic slowdown which followed the overheating of the immediate post-Covid period. Certainly, cargo volumes fell but at a much lower rate than the slump in freight rates would lead one to believe. This sharp downward slide, to which market leader MSC's drive for market-share certainly contributed, wreaked havoc with shipping companies' operating results in 2023.
  
  
• Despite the slump in freight rates and a slight improvement in service reliability, customers remained largely dissatisfied with the services they were offered. A variety of uncertainties and the use of an increasing number of surcharges to try to make up for the low level of freight rates angered shippers, who want greater transparency and visibility.
  
  
• Global warming is producing catastrophic consequences, which are now very visible, and yet emissions caused from the burning of fossil fuels are continuing to grow, year after year. The agreement concluded at the end of the COP 28 climate conference in Dubai on 13 December talks about "transitioning away from fossil fuels in energy systems" for the first time but no date was set for their removal. Some risks will no longer be insurable because of the amplitude of climate change and this subject can be expected to receive much more attention in 2024.
  
  
• Shipping companies are making real efforts to reduce their greenhouse gas emissions, which should come down by 15% in 2024. The contribution to be made by the cargo side to the sector's greening effort is far from having been settled, however. The "polluter pays" principle is by no means unanimously accepted.
  
  
• The container shipping sector contributes to global warming but is also a victim of it. Its operations can be disrupted, for example, by periods of drought.
  
  
• There are serious geopolitical tensions between the West and the Global South, a term which covers what used to be called the Third World. Shipping is no longer spared from the threat of intimidation, sabotage and commando-style actions, even in the container sector, and control of the seas has once again become an issue in the global power battle. Maritime sovereignty has become a strategic issue in a period in which there are so many sources of tensions that the question is no longer whether there will be another war but rather when and where it will take place.

It is in this morose climate that we are going to take the plunge and engage in the now traditional Upply forecasting exercise in which we try to identify three possible scenarios for the container shipping sector in 2024.

CONTENTS

• Scenario 1: missing out the Suez and Panama canals
• Scenario 2: returning to real carrier discipline
• Scenario 3: a major geopolitical conflagration