“History never repeats itself, but it does often rhyme,” said famous American author Mark Twain.

Last week, we recapped significant supply chain events in 2023. From West Coast labor strife to the world’s largest ocean carriers announcing their split, last year had some unique turns for the industry. While it’s a fact that every year is disparate, common themes often transcend the calendar. Issues that arise in front of the industry usually, unnervingly, rhyme with those overcome in the past.

The following are three issues that will likely surface again in 2024.

1: External events beyond market control

All things considered, 2023 was mostly a gap year when it came to trade disruptions beyond industry control. The clock has to be winded back to 2022 for a better look at how external events interfere with the market.

The global pandemic was undisputedly the king of chaos. This notorious title will likely live into the distant future as well (fingers crossed that an event even more disruptive will never materialize). This indiscriminate event compromised supply chains worldwide—from the bustling mega ports in China to the hardy rail ramps in the U.S. Midwest. No corner of the world was immune to Covid-related calamity.

A great shipping crisis was born, characterized by stifling port congestion, dastardly delays, tightened capacity, and container rates as high as the price of a new sedan. Historical demand further compounded these deteriorating conditions. The “unflappable”, pre-pandemic, supply chain that shippers once knew vanished into dust.

External events in 2024 aren’t repeating the history of this crisis two years ago, but they certainly rhyme. Existing turmoil in both the Panama and Suez canals are indefinite and out of the industry’s control. The former is compromised from an unrelenting drought, while the latter is engulfed in a geopolitical fracas.

The impact on the market can already be seen. Surcharges and restrictions are littered at the Panama Canal, squeezing space and raising transportation costs. While service adjustments to avoid the Suez Canal have led to longer transits and higher rates. The routing change has also required ocean carriers to allocate more vessels in their weekly rotations—tightening available capacity.

2: An awkward contract season

The present canal woes are leading right into the industry’s annual contract season. Every year, shippers and ocean carriers converge to settle on contracted space commitments for quasi-fixed rates. The season typically runs until April 1, the start of fiscal Q2.

Contract negotiations are imminent every year. However, the issue for the 2024 cycle, which draws parallels to previous years, is how shippers navigate their decision making amid market uncertainty.

Last year had its own uncertainty, however shippers were the ones in the driver’s seat. Rates throughout Q1 2023 were at their lowest in years, while overall market conditions were soft. After being ruled by the whims of ocean carriers in 2021 and 2022, some shippers sought best-bargain revenge and locked into contracted rates at the start of 2023.

While others were more patient and waited. They banked on the market softening even more, which would lower spot rates tremendously. And they were right. Those who postponed signing contracts after April 1 took advantage of a continuing dormant state of freight.

2024 rhymes with the uncertainty of last year, but this time around, the dynamic is different. It can be argued that carriers are the ones in the driver’s seat.

With canal issues tightening the market, carriers have used this as an opportunity to go on the offensive. On New Year’s Day, major carriers implemented aggressive general rate increases (GRIs) across the Asia-U.S. trade. In extreme cases, 40-foot units saw a $1,000 bump. On top of this, another wave is expected Jan. 15 for the second half of the month. Rates are nearly three times higher than last January’s levels.

Shippers are now in a different position this contract cycle. Do they bite the bullet now on elevated rates in case the market tightens further? Or do they wait and gamble on the market softening after April?

This important decision comes down to assessing risk.

For starters, the canals. The Panama Canal is likely compromised through early 2024. While stakeholders have expressed optimism that the waterway will improve, the canal’s restrictions, in some way or form, will remain in play for the next few months. However, the Suez Canal has a more intriguing question mark. Container shipping has completely withdrawn from the canal to avoid indiscriminate rebel attacks on their fleets. The actions of the assailants revolve around aggravated conflict in the Middle East. The situation transcends global trade and has captured the attention of world governments, including the U.S., who have voiced their intentions of countering this growing threat—whether that’s drone strikes on rebel targets or military convoys to escort marine traffic.

Heading into contract season, shippers need to weigh the indefinite uncertainty with the canals into their decision making. Their conditions will directly play into the state of the market. That said, it’s clear most shippers will be on the fence this contract season—unclear whether to commit now or wait it out.

An effective strategy, which emerged from the pandemic shipping crisis, is a hybrid approach of awarding freight volumes. Shippers will commit some of their annual volume to contracts, while allocating the remaining amount to the spot market.

3: Labor uncertainty

Speaking of contracts, on Sep. 30, the existing labor contract for 45,000 unionized dockworkers along the East and Gulf coasts will expire. Maritime employers (ports and ocean carriers) and the International Longshoreman’s Association (ILA) are expected to start talks earlier in the year to reach a new deal before this deadline.

ILA leadership have publicly announced that they’re seeking a landmark contract and informed union members to prepare for a strike on Oct. 1 if the two sides fail to produce a deal.

The labor situation harkens back to one that took place on the West Coast last year. While an agreement was ultimately reached last June, contract negotiations lasted for 13 months. In other words, West Coast dockworkers were without a labor contract for over a year.

For the first half of 2023, this protracted period of labor uncertainty stirred anxiety in shippers. Many rerouted their cargo away from West Coast ports, opting for East or Gulf ones instead.

While no mass-union strike ever occurred, the prolonged impasse casted a shadow over the West Coast and undermined shipper-confidence in its port system.

2024 now shifts the focus to the East and Gulf coasts. Stakeholders are admittedly nervous ahead of the two sides beginning negotiations, as last year’s West Coast saga remains a clear memory.

Labor uncertainty, a defining theme of 2023, is back on the menu for 2024.