That is the backdrop for this week’s S&P Global TPM container shipping and supply chain conference in Long Beach, California, an annual event that marks the start of container shipping contract negotiating season.

Attendees this year include industry heavyweights like container carriers MSC, Maersk and Hapag-Lloyd, marquee customers including Walmart, and major logistics firms including DSV and DHL.

Why it matters: Canadian agricultural goods are shipped all around the world, and Canada is at a freight disadvantage in many markets compared to some competitors

These companies will be grappling with the ripple effects of increased protectionism, which could reduce international trade while weakening the negotiating position of massive container ship owners that have drawn robust profits and for years held the upper hand in pricing.

Trump has already slapped an additional 10 per cent tariff on goods from China, the world’s largest exporter, and has proposed million-dollar port entry fees for Chinese-built ships.

As early as Tuesday, the U.S. could impose 25 per cent tariffs on familiar goods like avocados and tequila from Mexico, and beef, lumber and oil from Canada.

Trump has threatened to levy an additional 10 per cent tariff on Chinese goods. His administration also plans new or higher tariffs on steel and aluminum and has floated 25 per cent duties on products from the European Union.

“Unprecedented uncertainty is all around,” said Peter Sand, chief analyst at transportation pricing platform Xeneta.

The world’s biggest importer’s shift away from free trade hits as global supply chains are managing higher costs from global warming-fueled severe weather and routing ships away from the Suez Canal to avoid attacks by Iran-backed Houthi militants in support of Palestinians in Gaza.

U.S. container imports of everything from plastic toys to machine parts have surged, in part due to early purchases to avoid tariffs. But trade experts warn that a pullback is likely once new import taxes kick in, targeted nations retaliate, and inflation-weary shoppers absorb the brunt of tariff-related cost increases – something that could pressure shipping demand and prices.

The Drewry World Container Index’s spot rate for a 40-foot container was (US) $2,629 as of Thursday, 75 per cent below the pandemic peak of $10,377 in September 2021 and lowest since May 2024.

“The geopolitical landscape has of course become more complex which could lead to wild swings for freight rates in either direction, but our base case is for a moderation throughout 2025,” Jefferies analysts said in a recent note.

In another move that has set off alarms around the globe, the U.S. Trade Representative on Feb. 21 proposed hefty fees on Chinese-built vessels entering U.S. ports under a union-supported plan to spur U.S. shipbuilding.

Under the proposal, a vessel owned by Chinese maritime transport operators including state-owned COSCO would pay a port entrance fee of up to $1 million per vessel. The fee for other operators using Chinese-built ships could top out at $1.5 million.

The change could benefit Taiwanese and South Korean liner operators. Still, experts warn it will have a major impact on container carriers and could translate into steeper consumer prices for goods from toys and clothing to food and fuel.

“The economic burden on U.S. exporters and importers will be huge,” container shipping expert Lars Jensen said on LinkedIn.

“The actions taken by the U.S. administration over the past four weeks are unprecedented in scope and scale.”

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The strike blocks everything from food to automobile shipments across dozens of ports from Maine to Texas, a disruption analysts warned will cost the economy billions of dollars a day, threaten jobs and potentially stoke inflation.

Still, President Joe Biden’s administration has indicated it will not use federal powers to end the strike, and on Tuesday pressured dockworker employers to bump up their contract offer to land a deal.

The International Longshoremen’s Association union, which represents 45,000 port workers, had been negotiating with the United States Maritime Alliance (USMX) employer group for a new six-year contract ahead of a midnight Monday deadline.

The ILA said in a statement it shut down all ports from Maine to Texas at 12:01 a.m. ET after rejecting USMX’s final proposal, adding the offer fell “far short of the demands of its members to ratify a new contract”.

The ILA’s leader, Harold Daggett, has said employers such as container ship operator Maersk and its APM Terminals North America have not offered appropriate pay increases or agreed to demands to stop port automation projects that threaten jobs.

“We are prepared to fight as long as necessary, to stay out on strike for whatever period of time it takes, to get the wages and protections against automation our ILA members deserve,” Daggett said on Tuesday.

USMX said in a statement that: “Our current offer of a nearly 50 per cent wage increase exceeds every other recent union settlement, while addressing inflation and recognizing the ILA’s hard work to keep the global economy running.”

Daggett said the union is pushing for more, including a $5 per hour (C$6.75) raise for each year of the new six-year contract.

The White House weighed in, saying it was time for the USMX to negotiate a fair contract for workers.

“Shippers have made record profits since the pandemic, and in some case, have seen profits grow in excess of 800 per cent,” White House press secretary Karine Jean-Pierre said, referring to the COVID-19 pandemic that led to a boom in shipping demand.

“It’s only fair that workers who put themselves at risk during the pandemic to keep ports open see a meaningful increase in their wages, as well.”

Acting Secretary of Labour Julie Su said the employer group has “refused to put an offer on the table that reflects workers’ sacrifice and contributions to their employer’s profits.”

“The parties need to get back to the negotiating table, and that must begin with these giant shipping magnates acknowledging that if they can make record profits, their workers should share in that economic success,” she said.

The strike, the ILA’s first major stoppage since 1977, is worrying businesses that rely on ocean shipping to export their wares or secure crucial imports. It affects 36 ports – including New York, Baltimore and Houston – that handle a range of containerized goods from bananas to clothing to cars.

The walkout could cost the American economy roughly $5 billion a day (C$6.75 billion), JP Morgan analysts estimate.

French shipping group CMA CGM, the world’s third-largest container shipper, on Tuesday issued a force majeure notice over the strike, and said it may charge additional shipping fees for delayed vessels.

The National Retail Federation called on President Joe Biden’s administration to use its federal authority to halt the strike, saying the walkout could have “devastating consequences” for the economy.

Biden officials have repeatedly said the Democratic president will not do so.

The dispute is wedging labour-friendly Biden into a virtual no-win position, with Vice President Kamala Harris in a razor-thin race for the White House with Republican former President Donald Trump.

The U.S. Department of Agriculture said on Tuesday it does not expect significant changes to food prices or availability in the near term.

Grocery chain owner Ahold Delhaize also said it expected minimal short-term impact on its supply chain.

Backup plans

Hundreds of dockworkers demonstrated on Tuesday at a New York City area shipping terminal in Elizabeth, New Jersey, carrying signs and shouting slogans as music blared and vendors hawked food. Daggett arrived to rally them with cheers of “ILA all the way!”

“Everything that comes in this country comes from the containers off these ships that my men work. And I want the world to know it. Don’t come after us saying we’re greedy. Go after those greedy bastards that own these companies in Europe,” Daggett told reporters.

Retailers accounting for about half of all container shipping volume, along with other shippers, have been busily implementing backup plans to minimize the impact of the strike as they head into the winter holiday sales season.

Many of the big players rushed in Halloween and Christmas merchandise early to avoid any strike-related disruptions, incurring extra costs to ship and store those goods.

Retail behemoth Walmart, the largest U.S. container shipper, and membership warehouse club operator Costco say they are doing everything they can to mitigate any impact.

Danish drugmaker Novo Nordisk, meanwhile, said it has workaround plans in place to minimize or prevent any disruption to its production, including by using air freight, CNBC reported on Tuesday, citing a company spokesperson.

Lars Jensen, CEO of shipping consultancy Vespucci Maritime, said the strike is unlikely to lead to any critical shortages, but could raise costs for consumers if it is prolonged.

“At the end of the day, the only one who’s going to end up paying the bill for this is the U.S. consumer, simple as that, because import costs are going to rise and those costs are going to be passed on to all the imported products,” he said.

More than 38 container vessels were waiting at anchor near U.S. ports by Tuesday, compared with just three on Sunday, according to Everstream Analytics.

—Additional reporting for Reuters by Gursimran Kaur, Nilutpal Timsina, Shivani Tanna and Shubham Kalia in Bengaluru, David Shepardson in Washington, Stine Jacobsen in Copenhagen, and Gianluca Lo Nostro in Gdansk.

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Shipping capacity continues to be hampered by ongoing unrest around the Red Sea, wrote FCC senior economist Leigh Anderson in a July 17 article on the lender’s website.

As recently as July 15, Houthi fighters claimed to have targeted three vessels in the Red and Mediterranean seas with ballistic missiles, drones and booby-trapped boats, Reuters reported on July 16.

Since November, the Houthis have sunk two vessels and seized another. This has led to ships avoiding the shortcut of the Suez Canal and rerouting around the horn of Africa.

The much longer journey has negatively affected shipping times and port scheduling, leading to congestion in Asian ports, Anderson wrote. Low water levels in the Panama Canal, bad weather and labour issues in key ports have exacerbated the issue.

This has doubled the Baltic dry index, a global measure of dry bulk freight prices, and more than tripled the world container index, Anderson said—though shipping is still cheaper than in 2021.

Detours around Africa aren’t expected to end soon, said Anderson, but there are signs global port congestion will ease.

Shipping companies are adapting schedules to the new operating environment, with some redirecting to larger Asian ports, unloading shipments, and reloading onto smaller ships to continue to final destinations.

Water levels in the Panama Canal are returning to normal faster than expected due to recent rainfall. Daily transits are increasing and should be near the historic average by August.

“Fuel prices remain a wildcard considing they tend to respond to changes in oil prices and also to changes in inventory, which can be volatile,” wrote Anderson.

In July, U.S. crude oil inventories were down 19 per cent compared to the same month over the last five years. While this could support oil prices, “we’re not anticipating a surge any time soon,” Anderson said.

For Canadian agriculture, the possibility of domestic railway strikes remains the biggest threat to transportation costs, he added.

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About 7 million metric tons per month of grain cargoes usually transit the Suez Canal into the Red, but that has dropped significantly as Iran-backed Houthi militants have continued attacks on shipping despite U.S.-led air strikes on Houthi positions in Yemen.

“We calculate that another 12 vessels were diverted away from the Red Sea this week, carrying a total of about 700,000 metric tons of grain,” said Ishan Bhanu, lead agricultural commodities analyst at data provider and analyst Kpler.

“A total of about 4.5 to 4.6 million tons of grains cargo has avoided the Red Sea since December. We also saw more wheat being shipped from France and the Black Sea to Asia diverting away from the Red Sea.”

Many bulk carriers are still transporting grain through the region, however.

“A lot of vessels originating in the Black Sea are still taking the Red Sea route,” Bhanu said. “Diversion is more expensive for these vessels compared with those sailing from Europe or the United States.”

Commodity traders said it has become more difficult but not impossible to book ships for Red Sea sailings.

“It is hard but you can still find ships,” said one European grain trader involved in booking vessels for cereal exports to Asia. “Freight costs have risen and not all want to sail through the Red Sea even with a premium, but some will.”

One German shipping analyst said that some ship owners already operating in war-torn Ukraine are more willing to take the risk of traversing the Red Sea.

“Some vessels carrying Ukrainian grain exports to Asia are still transiting the Red Sea,” the analyst said. “These owners were already willing to accept the high risk to their ships and crews by loading in Ukraine.”

–Reporting for Reuters by Michael Hogan.

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Bearish production estimates for corn and soybeans from the United States Department of Agriculture’s (USDA) monthly supply/demand report released on Jan. 12 had major effects on prices, according to Jack Scoville from The Price Futures Group in Chicago.

“They increased yields for corn and soybeans in a rather significant way,” Scoville said. “The USDA really did increase demand, especially on the corn side, because of the increased production, but they didn’t increase demand as much as they increased production. That caught the market by surprise.”

While last week’s USDA report caused much of the weakness on the markets, improved weather conditions in Brazil put additional pressure on corn and soybean prices, according to Scoville. U.S. soybean and wheat exports are also less than what they were last year.

“There’s a lot of talk around Chinese demand for soybeans being 20 per cent less this year due to reduced hog herd sizes. That’s also hurting the soybeans,” he said.

Scoville added that wheat futures were also down due to lower prices for wheat exports from the Black Sea region. However, added shipping costs due to vessels re-routing away from the Red Sea amid recent missile attacks are also affecting markets.

“It’s something that we’re watching and we’re hoping that it’s figured out very soon, but so far, the Houthis continue to bomb very indiscriminately,” Scoville said.

He hopes for an uptick in demand in the coming weeks, while also paying attention to weather conditions in the U.S. and South America.

“If the weather becomes problematic in Brazil, it will be positive for prices and we have a whole growing season ahead of us,” he added. “Last year, we had a dry year and all sorts of problems. Those supported prices, as well. Mostly weather and demand are things to keep an eye on.”

March corn dropped to US$4.40 per bushel on Jan. 17, while March soybeans fell to US$12.03/bu. on Jan. 12. March spring wheat in Minneapolis also reached a new contract low of US$6.80/bu. on Jan. 17, while March Chicago and Kansas City wheat contracts were below US$5.80 and US$6/bu., respectively, for the first time since late November.

— Adam Peleshaty reports for MarketsFarm from Stonewall, Man. 

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The BDI settled at 1,360 points on Jan. 15, dropping 59 per cent off the high of 3,346 points hit on Dec. 4, 2023, to trade at its lowest level in four months.

The BDI is compiled by the London-based Baltic Exchange and provides an assessment of the price of moving major raw materials by sea. The overall BDI includes sub-sectors for the different classes of ocean vessels – including capesize, panamax and supramax. It is often seen as a leading indicator of global economic activity.

A seasonal slowdown, reduced congestion at Brazilian ports and cancelations of some vessels headed from China to North America were all said to be contributing to the declining rates.

While bulk rates have fallen over the past month, container rates have shot higher. Drewry’s World Container Index (WCI), which tracks container rates, was at US$3,072 per 40-foot container on Jan. 11, 2024 – roughly double where rates stood at the beginning of December.

With more and more vessels diverting away from the Red Sea and taking lengthy detours there were reports of some shipping companies quoting rates as high as US$10,000 per 40-foot container from Shanghai to the United Kingdom, roughly quadruple levels only a week earlier.

Canada is at a freight disadvantage compared to its competitors exporting grains and oilseeds into many markets, with lower freight rates helping counter that disadvantage.

— Phil Franz-Warkentin is an associate editor/analyst with MarketsFarm in Winnipeg. 

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Houthi forces in Yemen struck the U.S.-owned and operated dry bulk ship Gibraltar Eagle with an anti-ship ballistic missile, U.S Central Command said on Monday, although there were no reports of injuries or significant damage.

Dry bulk carriers are often used to transport grains although in this case the Gibraltar Eagle was carrying a cargo of steel products.

“This week’s attack is certainly viewed as an escalation by bulk carriers and owners. There is a great deal more concern, and I’m fairly sure it will divert much greater volumes, including grains, to other routes,” the head of the bulk shipping department at a German trade house said.

He was speaking before reports emerged of an empty Malta-flagged, Greek-owned bulk carrier also being hit by a missile on Tuesday while northbound in the Red Sea. There were no injuries.

Ishan Bhanu, Lead Agricultural Commodities Analyst at Kpler, said about seven million tons of grains moves through the Suez Canal in an average month but now about 20 per cent of the cargoes were being diverted around the Cape of Good Hope.

“This number was closer to 10 per cent ten days ago, but we have seen more diversion decisions being made in the last few days. Soybeans from the U.S., wheat from Europe and rapeseed from Australia are mainly affected,” he said.

A senior grain trader at a German trade house dealing with Asia said they were still shipping through the Red Sea but were watching the situation closely.

“There has been no impact for us yet. But I say yet.”

Rerouting appeared to be affecting a large program of French wheat exports to China that started in December.

Among 12 wheat cargoes to have left France for China since last month, five had travelled through the Suez Canal and Red Sea while seven were taking the longer route around Africa, including two that had turned back in the Mediterranean, LSEG shipping data showed.

France is the European Union’s largest wheat exporter and China has become a major destination in recent seasons, particularly as France has lost market share in Algeria.

–Reporting for Reuters by Nigel Hunt in London, Michael Hogan in Hamburg and Gus Trompiz in Paris.

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In a decision handed down yesterday, the Canadian Transportation Agency ruled that the Canadian National Railway Company (CN) exceeded its maximum grain revenue of  entitlements in crop year 2022-23 by nearly $3.5 million. Its limit is $1.08 billion, the CTA said in a news release.

The Canadian Pacific Kansas City Railway Company (CPKC) exceeded it’s revenue limit by almost $3.4 million. Its revenue is capped at $940.5 million.

CN and CPKC have 30 days to pay the overage, plus a five per cent penalty.

By regulation, these payments go to the Western Grains Research Foundation, the news release added.

The railways moved some 60 per cent more grain this year than last year, with over 45.3 million tonnes freighted across the country. Last year, the trains moved 28.4 million tonnes.

The increase can mainly be attributed to recovery after the droughty 2021-22 season, CTA said.

In the last season, both railway firms also exceeded their revenue caps, chipping in $5.7 million to grain research.

Over the 2022-23 season, the bulk of grain moved went to Vancouver, with CN carrying a bit more than 15.1 million tonnes, and CPKC moving just over 15.4 million, according to the CTA’s written decision.

CN brought 4.8 million tonnes to Prince Rupert, just over 1.5 million to eastern Canada, totallying 24.2 million tonnes with an exchange switching adjustment.

CPKC brought 4.6 million tonnes to Thunder Bay, and nearly 861,000 tonnes to Eastern Canada with a total of 21.1 million tonnes moved, including the exchange switching adjustment.

—Geralyn Wichers is associate digital editor of AGCanada.com. She writes from southeastern Manitoba.

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The shipping snarl through one of the world’s main maritime trade routes comes at the peak season for U.S. crop exports, and the higher costs are threatening to dent demand for U.S. corn and soy suppliers that have already ceded market share to Brazil in recent years.

Ships moving crops have faced wait times of up to three weeks to pass through the canal as container vessels and others that sail on more regular schedules are scooping up the few transit slots available.

The restrictions could continue to impede grain shipments well into 2024 when the region’s wet season may begin to recharge reservoirs and normalize shipping in April or May, analysts said.

“It’s causing quite a disruption both in expense and delay,” said Jay O’Neil, proprietor of HJ O’Neil Commodity Consulting, adding that the disruption is unlike any he’s seen in his 50 years of monitoring global shipping.

The Panama Canal Authority restricted vessel transits this autumn as a severe drought limited supplies of water needed to operate its lock system. The Authority did not respond to request for comment on grain shipment delays.

Only 22 daily transits are currently allowed, down from around 35 in normal conditions. By February, transits will shrink further to 18 a day.

Grain ships are often at the back of the line as they usually seek transit slots only a few days before arriving, while others like cruise and container ships book months in advance.

The Authority also offers the rare available slots to its top customers first, none of which are bulk grain haulers, O’Neil said.

Any scheduled slots that come available are auctioned off, but demand is exceptionally high. Some slots have gone for $1 million or more, untenable costs for the traditionally thin-margin grain trading business.

“The grain trades and the bulk carrier segment are going to be the last customers to go through the Panama Canal. I would not rely on the Panama Canal any time soon,” said Mark Thompson, senior trader at Olam Agri.

Wait times for bulk grain vessels ballooned from around five to seven days in October to around 20 days by late November, O’Neil said, prompting more grain carriers to reroute.

Options include sailing south around South America or Africa, or transiting the Suez Canal. But those longer routes can add up to two weeks to shipping times, elevating costs for fuel, crews and freight leases.

The benchmark Baltic Dry Index .BADI, considered a benchmark for bulk grain freight, spiked to a 1-1/2 year peak on Dec. 4, more than doubling from a month earlier.

While grain prices have fallen from 2020 peaks, higher freight costs will be passed on to grain and oilseed importers who buy for human food and livestock feed.

“Commercial companies have been finding ways to navigate around the problem. But undoubtedly it costs the end-user more money,” said Dan Basse, president of Chicago-based consultancy AgResource Co.

In the second half of October, only five U.S. Gulf grain vessels bound for east Asia transited the Panama Canal, while 33 sailed east to use the Suez Canal instead, according to a U.S. Department of Agriculture (USDA) report. In the same period last year, 34 vessels used the Panama Canal while only seven used the Suez.

Some U.S. exporters have also been rerouting crop shipments to Asia to load from Pacific Northwest ports instead.

But that, too, comes at a higher cost as those facilities source grain mostly via rail as opposed to the cheaper barge-delivered loads supplying Gulf Coast exporters.

Only 56.8 per cent of all U.S. corn exports in October were shipped from Gulf Coast ports this year, down from 64.9 per cent in October 2022 and 72.1 per cent in October 2021, according to USDA weekly export inspections data.

–Additional reporting by Gus Trompiz in Paris.

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