This year’s TPM conference once again brought together thousands of ocean carriers, forwarders, BCOs, tech providers and many other transportation and supply chain professionals. And once again it was a great opportunity to find out what’s most important to the industry right now and what the coming year might look like.
Trump II Trade War
US tariffs and trade barriers were obviously a major topic of discussion with “uncertainty” – a term supply chain pros disdain – cropping up often.
In terms of tariffs, more than one expert advised BCOs not to make any drastic adjustments just yet, because the landscape is still so uncertain. And because of experience from Trump I tariffs, shippers basically know what to do: pull forward, increase prices if tariffs happen, and then determine how and to what extent to restructure sourcing in response.
That being said, there were warnings that this time could be different since the different economic reality could see tariff pass-throughs more negatively impact consumer spending. And for freight, whereas last time tariffs shifted trading patterns around while volumes continued to grow, a tariff-fueled recession could see ocean volumes dip as well.
The US Trade Representative recently proposed a rule that would target China’s influence in shipbuilding by imposing fees ranging from $500k to $1.5 million per US port call by any Chinese carrier, vessel, or other carrier that has Chinese vessels in their fleet and that sets targets for the share of US exports to be moved by US flagged vessels in the future.
Aside from opposing this law from a cost perspective – fees would cost the industry an estimated $2B and amount to cost to shippers of $300 – $2,000/FEU – many experts also pointed to other negative knock-on effects and general infeasibility: smaller-vessel/lower volume lanes like the transatlantic would become uneconomical; carriers would only call one US port, omitting smaller ports like Oakland and overwhelming US hubs like LA/LB and Canadian alternatives like Vancouver; China’s 60% share of the current orderbook makes a near term shift away unlikely, and a lack of US flagged vessels likewise makes export targets unreachable.
Red Sea Return and Overcapacity
While there was consensus that carriers won’t return to the Red Sea until vessel safety is assured, no one was sure when that exactly will be, though some expressed optimism that a permanent Israel-Hamas ceasefire could happen this year and see the waterway re-open some time in H2. (One interesting insight was that falling demand and freight rates could incentivize carriers to go back sooner rather than later in an effort to reduce costs.)
Though Hapag-Lloyd’s CEO thought carriers might be able to pull off a “controlled return” through the Suez Canal – avoiding the vessel bunching, congestion and equipment imbalance that could result from vessels suddenly arriving well ahead of schedule – conventional wisdom has the industry facing several months of disruptions until normalization.
Once things normalize, a lot of capacity – currently tied up in longer voyages around the Cape of Good Hope – will be released. The global fleet will also be even larger than when spot rates crashed in 2023. And though carriers anticipate being able to manage capacity through scrapping, slow-steaming and blank sailings, most everyone else expects a period of overcapacity though the degree of overcapacity was subject of debate.
Innovation and Tech
Logistics technology was also a key theme this year – and not just in TPMTech sessions.
The recently finalized labor contract between the ILA and East and Gulf Coast port operators bans full automation or technology that eliminates jobs, but allows semi-automation. This development will be key to growth for many of these US ports because of simple facts of geography: with nowhere to expand physically at many of the major East Coast ports, semi-automation through tech will help ports grow through increased density and efficiency.
While index-linked ocean contracts were an aside last year, this year the topic had a well-attended panel discussion. Ocean container shipping is an inherently volatile market, with the past few years displaying extreme examples of spot price fluctuations. When spot prices climb too high above contract rates, carriers tend to roll or charge premiums to move BCOs’ long-term contracted volumes, and when spot rates crash, BCOs are motivated to no-show and shift to spot.
Index-linked contracts remove these incentives through floating or adjusted rates. And BCOs are looking to tech not only to model index-linking, but track index-linked volumes’ performance against their other shipments and provide overall rate visibility. As the container derivative market matures, shippers will look for tools to manage this aspect of operations and finance too.
But panels dedicated to freight tech were a major feature too. One, comprising a BCO, forwarder and tech provider and moderated by Freightos’ Ian Arroyo asked – who, given the proliferation of supply chain data sources, solutions and platforms, is responsible for bringing all these elements together into one source of truth for that elusive visibility BCOs are after?
Answer: There is no one right answer. Depending on the shipper’s preferences, expectations and capabilities, sometimes it should be the forwarder, sometimes the tech provider and others the shipper themselves.
