Huge volumes of shipping vessels are now “bunching” at ports and terminals, with global shipping lanes “out of whack” due to the Red Sea Crisis and problems with the Panama Canal. These add strain to an industry struggling with spiralling costs and a shortage of vessels.
It comes as Sea Intelligence reveals that “vessel bunching” – which is defined as the number of sailings in a given week that exceed scheduled services – has skyrocketed, especially between Northern Europe and Asia – responsible for more than 70% of the trade in bulk timber products.
“While the offered capacity may be the same over two weeks, i.e., no vessel sailing in one week followed by two vessels sailing the next week, having two vessels depart in one week and zero vessels in the second week results in an extraordinarily high workload in one week and none in the second week,” according to Alan Murphy, CEO of Sea-Intelligence.
“This increases the risk of port congestion – and as a ripple effect, a similar crunch on truck, rail, and barge capacity use. Vessel bunching can, therefore, be seen as a proxy measure for the pressure on ports and the corresponding likelihood of congestion problems,” he said.
Last month, the Russel Group reported that the economic loss caused by disruptions in two of the world’s largest shipping routes, the Red Sea and Panama Canal, has reached more than $1.25 trillion. This, in turn, has delayed the freight of furniture, engineered wood products, and other lumber-based products.
In August, Wood Central spoke to freight operators who run shipping lines in the Asia-Pacific region who said, “Simply put, (until now) we haven’t had enough commercial vessels on the water to meet current demand.”
“The situation has seen the world’s largest shipping lines charter smaller boats to plug the gaps in the supply chain. This only adds to sea and port traffic, exacerbating delays in getting freight from point A to B.”
And the situation is expected to worsen, according to Moody’s Outlook Report published today – which forecasts a 7% drop in aggregate EBITDA, driven by a large decrease for container shipping companies.
“This will see the business landscape for container shipping companies worsen due to a combination of fleet growth as well as the continued effects of the major disruption seen in the Red Sea over the past year.”
It said, “China, an important driver of trade growth both for trade between Asian countries and for exports out of Asia, is showing signs of a broad-based slowdown.” However, “the export of goods to the US, EU, and UK is recovering from 2023 lows and even more so to other Asian countries.”
Nevertheless, “heightened geopolitical risk and increasing protectionism could weigh on overall sector performance”, the report warned.” Even though we expect the world economy will continue to grow in 2025, underpinning the global trade on which the transport and logistics industry depends, the sector still faces plenty of risks.”
Those risks include unexpected geopolitical events like the Ukraine war and the Israel-Hamas conflict, as well as potential tension between China and the US and EU – which includes Donald Trump’s tariff plan.
Why global shipping can crunch timber supply chains
As one of the most traded products on earth, more than US $188 billion worth of timber products are traded from country to country and port to port, with a large portion of this ‘bulk trade’ occurring on open waters. As a result, the global supply chain for timber products—now used to build some of the largest buildings in the world—is highly vulnerable to geopolitical turmoil along the shipping network.
According to the World’s Top Exports, the crisis has impacted the US by up to $50.8 billion of sawn wood, with China among the most affected. The big six—including China, Canada, Russia, Sweden, Germany, and the US—are responsible for over 70% of exported timber that widely uses the seaway; however, the impacts are being felt wider, with Australian-bound timber tied up in the bottleneck.
- To learn more about the Red Sea and Panama Canal crises and their impact on timber supply chains, visit Wood Central’s special features.
