Global Congestion Building: Crisis Coming?

Posted 05/23/2024

The global logistics market is in a precarious position due to a variety of factors impacting the flow of cargo. The root of the problem remains the crisis in the Mideast and the re-route of cargo around the Cape of Good Hope accompanied by an unpredicted surge of cargo coming out of Asia. This has led to a spike in spot rates in the transpacific market and created significant congestion in Asian ports. There are literally no “extra” vessels available to provide relief to the current congestion, and we are seeing predictions of worsening congestion that could trickle down to all markets. Analysts such as Lars Jensen, President of Vespucci Maritime, speculate that the cargo surge could be an early peak season and could be temporary. If so, the congestion should not be long term. If the spike in volume continues for a longer period, we will see a more severe impact on the supply chain.

In terms of the Red Sea and closure of the Suez Canal, while attacks have decreased, there is no clear time frame to reopen the Suez to shipping. Opening of the Suez will also create a period of chaos with vessel bunching and port congestion for a period of time, but at this point we cannot predict when this key shipping route will resume. 

The current congestion and schedule disruption has created pain points for wine and spirits shippers, including significant delays in transshipment ports. Problem areas include delays in Freeport for cargo moving from Mexico to the USEC, and in Cristobal, Panama, for cargo shipping from Oceania to the USEC. We are monitoring the transshipment points closely and working with our ocean carriers as they develop contingency plans to improve cargo flows. 

The good news is that the situation in the Panama Canal continues to improve with increases in vessel movements and in maximum draft allowed. While the situation is still not back to normal, it is vastly improved from a few months ago.

Please reach out to WSSA with any questions or more details on regional issues.