“Conversations” with AI about International Shipping
A couple weeks ago, I posted an article about what AI “thinks” about international shipping. It contained a “conversation” I had with AI, where I asked it questions about international shipping. After sharing each question and answer, I gave my thoughts about what AI said. It was interesting to see the way AI answered questions pertaining to the international shipping industry, and the post seemed to garner a little extra attention from readers, probably because of the current fascination there is with AI.
Thus, back by popular demand, is another “conversation” with AI about international shipping. Perhaps, I’ll make this a semi-regular thing. But, perhaps, that’s what the machines want. Perhaps, I’ll just get bored with this AI fad and never do another one of these again. But, perhaps, that’s what the machines want, so we’ll forget about them as they’re working behind the scenes, taking over…
Whatever the case may be, I’ll do a similar structure today to last time: question from me, answer from AI, and my thoughts on the answer.
Q1: Ocean freights rates from India to the U.S. fell this month (May, 2024) due largely to capacity. Are there other major trade lanes right now that are doing similarly or where ocean freight rates are behaving very differently for U.S shippers?
AI:
Certainly! Let’s take a look at the current state of ocean freight rates on some major trade lanes. Here’s what I found:
- Asia to U.S. West Coast:
- The Freightos Baltic Index (FBX01 Weekly) shows that rates increased by 6% to $3,095 per FEU (forty-foot equivalent unit) for shipping from Asia to the U.S. West Coast1.
- Despite this increase, prices remain well above normal levels.
- Asia to U.S. East Coast:
- On the Asia-U.S. East Coast route (FBX03 Weekly), rates fell by 1% to $4,262 per FEU1.
- Again, these rates are still elevated compared to historical norms.
- Asia to Northern Europe:
- Asia to Mediterranean:
- Intra-Asia Feeder Services:
- Capacity Adjustments and Effective Capacity Growth:
- The ocean container market has settled into a new routine, avoiding the Red Sea due to Houthi attacks.
- While significant backlogs and congestion have dissipated, adjustments continue to cause moderate disruptions.
- Some West Mediterranean ports now serve as transshipment hubs for East Mediterranean-bound containers, leading to congestion.
- Terminals in Colombo, Sri Lanka, are also facing backlogs due to increased volumes for transshipment to the Middle East.
- Carriers are operating more vessels than usual on service loops that normally use the Suez Canal, but fewer than normal weekly Asia-Europe sailings are actually departing.
- These factors contribute to nominal fleet growth but only moderate effective capacity growth, resulting in still-elevated freight rates1.
- Outlook:
- Ocean rates out of Asia have remained relatively stable for the last four weeks.
- Rates from Asia to N. America’s East Coast and the Mediterranean are around $4,300 per FEU, while rates to the West Coast and Northern Europe are in the range of $3,000 to $3,300 per FEU.
- As demand increases during peak season, these rates are likely to rise further1.
- Transpacific Contract Rates:
- Ocean Delays and Cost Increases:
- While ocean rate increases are significant, they are nowhere near the surge levels seen during the pandemic.
- Shippers are navigating the challenges without resorting to more expensive alternatives like air cargo3.
In summary, ocean freight rates remain elevated on several trade lanes, and capacity adjustments continue to impact the market. U.S. shippers should closely monitor these developments as they plan their shipments. If you have any specific routes or additional questions, feel free to ask! 😊🚢🌎
My Thoughts
It is impressive that in a matter of seconds, AI creates a mini-essay on the topic of ocean freight rates. It is very bullet-point heavy, so essay may still be a strong word, even when modified by mini.
I tried to be very specific in the question, as that seems to be best when dealing with AI. While I asked it about routes and freight rates speecifically for U.S. shippers, AI went broader than that. I also asked it about freight rates right now, referencing the behavior of a specific trade lane this month, and AI again went broader with its answer. However, the answer does give a feel for general freight rate trends happening currently and this year compared to last year.
AI does give its sources, which I like. However, I should really say source, as it is pretty much exclusively relied on Freightos for its answer to my question. Nothing wrong with Freightos, but I would have rather seen AI pull from multiple sources. A single source could be anomalous, misleading, or even plain wrong. I suppose which sources AI decides are reliable depends upon its coders for criteria to judge websites and which search engines, like Google, that it relies upon when searching. Ah, what am I worried about. The internet is completely reliable when it comes to information, right?
Nevertheless, let’s bring up this single source issue with AI:
Q2: If you broaden your sources for information and data to as many as you can beyond Freightos, do you come to different conclusions than you reached when answering my question?
AI:
Certainly! While my initial response was based on information from the Freightos Baltic Index (FBX), I can broaden my sources to provide a more comprehensive view. Keep in mind that real-time data can fluctuate, but here are some additional insights from various industry reports and news sources:
- Drewry World Container Index (WCI):
- The WCI tracks container freight rates across major trade routes. As of May 2024, it indicates that rates have stabilized but remain elevated compared to historical averages.
- This aligns with the information I provided earlier.
- Alphaliner:
- Alphaliner, a shipping industry analytics firm, reports that carriers have been adjusting capacity to manage demand and maintain rates.
- While some routes experience congestion due to capacity constraints, others have seen smoother operations.
- Journal of Commerce (JOC):
- The JOC reports that carriers are implementing peak-season surcharges to offset rising costs and maintain profitability.
- Shippers are advised to secure bookings well in advance to avoid capacity shortages.
- Supply Chain Dive:
- Supply Chain Dive highlights that ocean carriers are benefiting from strong demand and limited capacity.
- The situation is expected to persist throughout 2024, impacting rates.
- Global Trade Magazine:
- Global Trade Magazine notes that shippers are exploring alternative routes and modes of transportation to mitigate high ocean freight costs.
- Some are turning to rail and air freight for urgent shipments.
In summary, while the specific numbers may vary slightly across different sources, the overall picture remains consistent: ocean freight rates are elevated due to capacity constraints and strong demand. U.S. shippers should closely monitor market developments and consider alternative strategies to manage costs effectively. If you have any further questions or need additional information, feel free to ask! 😊🚢🌎
My Thoughts
“Certainly” wasn’t the best word choice for AI to use in starting its answer. That would mean it definitely come to a different conclusions than AI gave when just relying on Freightos. It’s clear AI used “certainly” in communicating that it can and would broaden its sources to provide a more comprehensive view. AI’s first answer also started with “Certainly!” Clearly, it’s a regular way AI is programmed to begin responses.
The answer AI gave when sharing information from these different sources seems generalized to an extreme level. The JOC publishes tons of articles on international shipping. Among them is one about freight rates dropping sharply in India to U.S. lanes because of carriers injecting capacity into it. That article is part of what inspired my initial question to AI. However, the only mention of capacity that AI makes when it comes to the JOC is possible capacity shortages.
In fact, throughout the sources, AI tends to bring up capacity in terms of it being limited. It seems as though AI was either specifically looking for that or looking for similar word usages of capacity throughout the sources.
Overcapacity was a concern for the international shipping industry as 2024 approached. However, the Iran-backed Houthi attacks forced carriers to reroute cargo and use more ships to move the same amount of goods. The overcapacity became a blessing in creating the space to do that. I have previously written in Universal Cargo’s blog about carriers or industry experts saying that has brought current capacity close to its limit. AI gives little detail of the situation and none of the nuance.
The generality of AI’s summaries, while sounding good, make them just steps away from useless. However…
There is a general trend that can still be pulled from AI here. Still, from its answers and selective pulling of data, I would have little faith in trusting AI’s overall accuracy.
To Be Continued
Because AI gives decently sized answers, this post has already grown rather long after only two questions and answers. Thus, I’ll continue this conversation in the next post in Universal Cargo’s blog, unless a shipping news story pops up that needs to be covered first. In that case, I’ll still post the rest of the conversation with AI, but you’ll have to wait a little longer for part II.
