“The red sea situation is acute, but not chronic for shipping” says Christian Roeloffs, cofounder and CEO of Container xChange The shipping industry looking forward to up their game in ‘risk assessment and scenario planning’, ‘diversification of routes and suppliers’ & ‘regulatory compliance’ in 2024 as a response to geopolitical risks
Shipping professionals see ‘associated costs’ as the biggest headache in ‘24 due to geopolitical unrest
BRICS expansion to lead polarisation of global trade
Container xChange, a leading online container trading and leasing platform, releases its New Year’s Edition Container Market Forecaster, shedding light on the escalating geopolitical risks set to reshape the landscape of global trade in 2024.
In response to these geopolitical risks, the majority of shipping professionals surveyed in the month of December 2023, by Container xChange, 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.
Key Highlights:
Strategic Focus Areas: In response to geopolitical risks, shipping professionals are prioritizing ‘risk assessment and scenario planning,’ ‘diversification of routes and suppliers,’ and ‘regulatory compliance’ in 2024.
Rising Concerns: Survey findings reveal that the biggest concern stemming from geopolitical upheaval is the ‘associated costs,’ compounding the challenges posed by soaring operating costs. Many customers are worried about the rising costs resulting from the Red Sea situation like compliance charges, insurance premiums and war risk charges, etc. The operating costs have already been rising soon after the rates crashed in 2022, and demand failed to recover. On top of the rising costs, these additional surcharges will only add to the worries of shippers and forwarders.
BRICS Expansion:
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.
Technology Utilization: Despite challenges, 82% of industry professionals acknowledge the importance of technology for resilience in 2024, with predictive analysis and forecasting tools taking center stage.
Sanctions Compliance: Amidst geopolitical developments, sanctions compliance becomes critical for supply chain professionals, adding another layer of complexity to global trade.
Fluctuating Freight Rates: freight rates will increase in the short to midterm, but not in the long run as demand and supply is still highly imbalanced with no clear signs of a strong revival.
Talking about the Red Sea situation, Christian Roeloffs said, “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.”
There are still many geopolitical risks that have the potential to significantly impact shipping trade in 2024. We have the Israel–Hamas war, the related situation in the Red Sea, the Russia-Ukraine war with no end in sight, tensions between China and Taiwan and an increasing enlargement of the BRICS block.
“What can have a far- reaching and long-term impact on the global supply chain is the BRICS inclusions of more economies.” Roeloffs added.
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.
“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 polarisation 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.” he added.
The expansion of BRICS will bring further interesting developments worth noting. Iran and Saudi are now in the same organisation despite a strained relationship. Egypt has close commercial ties with Russia and India but also with the US. India and China together account for ~2.5bn people and could heavily influence global policymaking if they are more aligned. And finally, Russia and Iran being able to jointly influence « trade » policymaking within the BRICS group could lead to a « sharpening » of trade rethink of US-allies vs BRICS.
Amidst these developments, sanctions compliance will become critical for supply chain professionals for doing business.
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.” said Roeloffs.
About Container xChange
Container xChange serves as a global online platform facilitating container leasing and trading, connecting container users with owners. The platform streamlines the process of finding and exchanging containers, optimizing fleet management, and fostering collaboration across the shipping industry.
The neutral online platform connects supply and demand of shipping containers and transportation services with full transparency on availability, pricing, and reputation, simplifies operations from pickup to drop-off of containers, and auto-settles payments in real-time for all your transactions to reduce invoice reconciliation efforts and payment costs.
Currently, more than 1500+ vetted container logistics companies trust xChange with their business—and enjoy transparency through performance ratings and partner reviews. Unlike limited personal networks, excel sheets and emails that the industry generally relies upon, Container xChange gives its users countless options to book and manage containers, move faster with confidence, and increase profit margins.
