Lars Jensen: How to protect your supply chain against risks

'In the face of growing risks and geopolitical uncertainty, proactive planning doesn't just make sense – it’s crucial for a successful supply chain. Relying on hope is not a viable strategy', said Lars Jensen, chief analyst at Vespuccini Maritime, in an interview with APM Terminals Gothenburg, where we got to know his profound insights and sharp analyses of trends and potential risks in the global container market.  

A lot of large-scale geopolitical disruptions are currently affecting global trade. What should carriers be taking into account to protect their supply chains? 

'Although it would be fantastic if the world became more stable and predictable over the next year, it makes more sense to prepare for possible risks that may arise. By increasing our understanding of these risks, we can plan proactively and gain a competitive advantage over people who aren't planning. In recent months, ships have been forced to take detours around Africa, which is expected to continue at least for the rest of the year. At the same time, maritime trade is being threatened by seized cargo vessels in the Strait of Hormuz and cyber attacks are disrupting GPS signals on major routes such as the Black Sea, the Persian Gulf and the Baltic Sea. Managing these potential risks requires robust strategies'. 

You're monitoring the situation in the Red Sea closely. What happens now and what possible scenarios do you envisage in the future? 

'Conflicts and disruptions in the region are forcing all major carriers to travel around Africa, which is both costly and time-consuming. Although shipping companies currently have an overcapacity of vessels, capacity is almost exhausted as a result. An unlikely, but alarming scenario is that more vessels will be seized in the Strait of Hormuz, which would also result in the Persian Gulf being closed as a maritime route. This would create a huge amount of port congestion in the transshipment hubs in Asia and absorb ship capacity. If this happens, we can expect disruptions and price increases similar to those that occurred during the pandemic.  

A more predictable scenario is that the shipping companies will someday consider it safe to return to the Suez route. Some ships will then be halfway around Africa and the ships taking the shortcut through the Suez will catch up. For the ports in northern Europe, this means that twice as many vessels and twice as much cargo as normal will be passing through in a couple of weeks. All parties involved, including ports, intermodal carriers and importers, have to be prepared to handle these volumes when this occurs'. 

How is this affecting shipping prices? 

'Spot rates rose when the crisis in the Red Sea occurred, but fell rapidly back down. One interesting indicator is the Global Container Freight Index (CTS), which gives us an overview of the movements of each individual container around the world.  This shows that the effect of the Red Sea situation is relatively small when you look at the global picture. It's a reminder that while crises can have significant local impacts, their global impact is not always the same. One important factor is the large vessel capacity, which contributed to a faster normalisation of the market'. 

What's the current situation regarding demand in the container market? 

'At first glance, demand seems strong with a 10% increase over the past six months. However, this growth is compared to an extremely weak market a year ago. To get a more balanced picture, we need to compare with more normal conditions, which we haven't seen since 2019. In a favourable economic period, we would expect growth of around 3%, but we are now at around 1-1.5%. In the last five years, the increase in global demand has therefore been about half of what we would normally expect'. 

What trends and influencing factors do you envisage in the container market going forward? 

'One important trend is the transition to fewer but larger hubs with more transshipment, which is more economically beneficial. This strategy is reflected in the network alliances announced for 2024 and 2025.  

In the first quarter of 2025, I believe we can expect an intensive environmental debate, linked to the EU ETS (EU Emissions Trading System). The long detour around Africa’s south coast means increased emissions. If the situation continues for the rest of the year, we can expect shipping emissions to have increased by almost 30% when shipping companies report their emissions. This will put pressure on politicians to act and a possible measure could be to raise the carbon tax. 

In addition to environmental issues, an escalating trade conflict between the US and China is threatening to affect the shipping industry. Significantly increased tariffs on steel and aluminium products have already been discussed, and there's a growing call for increased trade restrictions between the two economic giants. Such a conflict can lead to changes in trade flows'.