Ottawa-While there are signs that global ocean shipping problems may be easing because of a weak global economic outlook that could restrain fuel price increases, Canadian exporters must include contingency planning in their operations to minimize any possible disruption, says Farm Credit Canada.

Major shipping lines have adjusted their operations to reduce the impact of ships having to sail around Africa rather than risk travelling through the Red Sea, FCC said. “Ships are having to travel 30 to 40 per cent further to reach their destinations and this requires more ships to achieve the same tonnage hauled.”

In addition, the rerouting of vessels around Africa negatively impacts global shipping times and port scheduling, causing port congestion in Asia as ships missed scheduled arrivals. Transportation bottlenecks have pushed up ocean freight rates during the last year. The Baltic dry index has doubled during the past year while the world container index has more than tripled. While freight costs have risen in 2024, prices remain lower than in 2021 when shipping costs reached record levels.

“Most of Canada’s exports head to destinations that do not require the Panama or Suez canals, but higher global freight rates do impact Canadian agricultural and agrifood producers and exporters. The consequences of increasing freight rates go beyond those involved in actually moving goods; higher shipping rates could feed into higher consumer prices and potentially disrupt the steady progress being made on tackling inflation,” FCC said.

Outbound containers from Asia are facing higher rates than inbound goods. The North America to Asia route is traditionally cheaper but in recent months those prices have also started to rise. Canadian freight rates out of the west Coast remain favourable meaning the impact to Canadian agriculture and food has so far been minimal.

While Red Sea detours around Africa are not expected to end anytime soon, FCC said there are reasons to be optimistic about easing global port congestion during the coming weeks. For starters, global shipping companies and their customers are adapting scheduling and arrivals to the new operating environment. Adding to the good news is the fact that water levels at the Panama Canal are reportedly returning to normal faster than expected, courtesy of recent rainfall in the region. As a result, daily transits are now increasing, and are likely to hit 35 next month which is near the historical average of 36.

“While things seem to be moving in the right direction with regards to freight costs, it’s worth pointing out that there’s still a lot of uncertainty. Fuel prices remain a wildcard considering they tend to respond to changes in oil prices and also to changes in inventory, which can be volatile.

“The lower-than-average inventories could be supportive of oil prices over the near term, although we’re not anticipating a surge anytime soon amid a still-dull global economic outlook. Indeed, we are expecting oil prices to average slightly above USD $80 per barrel in 2025, not far from current levels. That’s not to say there won’t be any volatility. Oil prices will fluctuate depending on news that impacts supply or demand such as hurricane season, escalation of conflict on the Red Sea, and U.S. economic trends but any volatility is expected to be short lived with prices reverting to our projected trend over the forecast period.”

This news item prepared for National Newswatch.