TPM is the industry’s unofficial start of contract season. At this year’s conference shippers will be trying to determine what impact carrier alliances, new tariff requirements, recent labor agreements, and the potential end of Red Sea diversions will have on the industry and their bottom lines.
One of the main issues shippers are expected to seek more clarity on is whether or not freight rates will drop once vessels start travelling through the Red Sea, as many experts believe that rates will fall once the route is deemed safe to travel – something which could happen by the third quarter. However, other problems could arise that could wipe out any gains from lower rates.
Among those potential problems is a significant capacity increase, with over one million TEUs of capacity expected to hit the market in 2025. Furthermore, vessels travelling through the Red Sea and around the Cape of Good Hope will create double volumes at European ports for at least four-to-six weeks after the canal opens. Other issues that are predicted to occur include grounding of empty boxes, growing stacks of empty containers, and major long-term congestion at all major Mediterranean and Northern European ports.
Another topic many industry leaders are worried about is the after-effects of the new labor agreements from the past three years. Specifically, many experts are trying to determine how these pay raises will impact costs and industry modernization. There is also growing concern about the potential short and long-term impacts of the new carrier alliances, as many are waiting to see how these new alliances impact their bottom line and whether or not they will be able to enjoy the same perks that they have in the past.
“This year’s TPM is all about finding answers to many of the industry’s most pressing questions,” said Anthony Fullbrook, president of OEC Group’s North American Region. “Unfortunately, shippers should not expect to leave the conference with any definitive answers, as there are simply too many unknowns. However, getting a better understanding of the direction things are headed should give some clarity on what to expect for critical issues such as contract rates and reliability.”
One issue that is highest on everyone’s mind is the possibility of the U.S. government imposing new and more severe tariffs. Some of the concerns related to higher tariffs include creating a rush from importers to ship products into the U.S. before tariffs take effect, which will not only take up valuable vessel space but also occupy a significant amount of warehouse space for the next few years – creating a glut of product, resulting in long-term storage costs. Additionally, the administration’s current tariff policy makes it difficult for most shippers to create a reliable supply chain strategy.
“With all the uncertainty in the market there is a real chance or rate volatility and carriers being forced to continue their historic blank sailing programs to reduce capacity and restore rates,” said Peter Hsieh, OEC Group Vice President of North American Sales. “The best option for shippers is to continue to allocate a portion of their logistics program to forwarders, because one thing that has become clear in the last few weeks is that in this market and having a reliable forwarder is essential.”
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