Recently, major shipping giants have issued price increase notices, including Mediterranean Shipping Company (MSC), China COSCO Shipping, Yang Ming Marine Transport, Maersk, CMA CGM, and HMMThese companies announced that they will raise container freight rates starting January 1, 2025.
Looking back at 2024, the upheaval in the Red Sea at the end of last year fueled a surge in freight rates, resulting in a booming shipping landscape during the yearHowever, as we shifted focus into the second half of 2024, the imbalance of supply and demand began to ease slightlyDespite heightened geopolitical tensions compared to the previous year, actual maritime disputes seemed to have decreasedIn light of this context, what are the primary reasons behind the impending freight rate increases? Furthermore, what trends and opportunities might the shipping market hold in 2025? This article aims to analyze these aspects.
As the industry undergoes a reshuffle, new policies have provided the necessary elements for rising freight rates
From a supply-demand perspective, the shipping sector in 2024 was characterized by a constrained supply side and steady demand growthThe geopolitical tensions in the Red Sea which began to evolve from late 2023 still lack solid resolution, forcing many shipping companies to opt for diversions to minimize lossesThis detour leads to extended travel distances, resulting in increased time and fuel consumptionFor instance, routes from Europe around the Cape of Good Hope now take approximately 15 extra days for a single trip, and about 30 additional days for a round tripSimilarly, the East Coast of America is experiencing significant capacity shortages, with single trip durations increasing by about 10 days and round trips extending by around 20 days, all contributing to inflated freight rates and capacity gaps.
Reaching the latter half of 2024, as the repercussions of the Red Sea crisis became the norm, shipping companies began to adapt to the heightened costs resulting from detours and gradually found a balance
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Concurrently, the added pressure of economic downturns in multiple European and American countries somewhat alleviated the tightness in the industry’s supply chainBy mid-July 2024, freight rate indices for routes between the US and China, as well as Europe and China, peaked and began their downward trend, reflecting an overall decline in the shipping sector.
At this point, it is essential to note that the underlying supply-demand environment in the market has not shifted significantly, hence the upcoming freight rate increases can largely be attributed to external disturbancesMoreover, reports suggest a restructuring of maritime alliances that occurred in late 2024. Members of the former THE Alliance such as ONE, HMM, and Yang Ming Marine Transportation announced a new alliance, set to last for five years, focusing on collaboration in the Asia-Europe routes starting from February 2025. Meanwhile, the existing 2M alliance between MSC and Maersk has also announced its termination by February 2025, with MSC unveiling plans for an independent operational network.
In light of these seismic shifts in the industry, the intensifying market competition is prompting various companies to aggressively gather cargo and client resources to prepare for the impending industry reshuffle
This round of price increases can thus be interpreted as major shipping companies gearing up for market share competition in anticipation of the alliance structure forming next year.
Industry insiders have indicated that the final extent of any price increase will depend on shifts in the market's supply-demand dynamicsAfter all, the available shipping capacity over the past two years has remained relatively sufficient, and the demand side also experiences fluctuationsAlthough numerous companies have announced price hikes for January, several entities within the supply chain are simultaneously working to expand their capacities to capitalize on high freight ratesA failure to grasp the industry outlook might lead to further changes in the market post the initial price hikes.
When considering the dynamics of the 2025 shipping market, indications suggest a potential pattern of “high at front and low at back,” particularly in relation to opportunities within the port industry
On the demand front, worldwide trade in 2024 seems generally favorable, which may come as a surpriseAmid rising geopolitical tensions and fears of deglobalization that persisted through 2022 to 2023, an analysis of 2024's transaction volumes reveals that the semiconductor manufacturing sector—an upstream area within the electronics industry—has primarily faced constraints, while the overall global trade volumes do not strongly reflect a trend toward deglobalization.
For the Chinese market specifically, from January to November 2024, cumulative import and export values reached $5.6 trillion, marking a 3.6% year-on-year growth, while exports totaled about $3.2 trillion, reflecting a 5.4% growthThe growth rates for China’s exports to the US, EU, and Latin American regions were at 3.9%, 2.4%, and 12.6%, respectively.
As we look towards 2025, many factors will likely follow the trend set in 2024, such as the ongoing Red Sea crisis and escalating geopolitical conflicts, which may continue to cloud the shipping industry's prospects
Uncertainties surrounding the effectiveness and timing of tariff policies may also yield unpredictable fluctuations in direction and magnitudeHowever, a broad expectation is that the overall shipping market will exhibit tendencies toward strong initial performance but possibly decline as a result of policy impacts at later stages.
Within the oil transportation sector, there are good prospects for expanded supply, although this may be countered by inhibited demandMarket forecasts imply that OPEC+ may gradually ease an additional voluntary cut of approximately 2.2 million barrels per day starting April 2025, alongside stable production capacities from Russia and IranHowever, from the perspective of energy demand, the overarching shift toward alternative energy sources is likely to reduce growth rates in traditional fossil fuel demandBy the end of 2023, an increasing percentage of idle Very Large Crude Carriers (VLCCs) dampens the potential for oil transport prices to rise, and predictions suggest that without pricing improvements, the oil transport sector might continue to face challenges in 2025.
Regarding dry bulk transport, unexpectedly high trading figures in 2024 have led to elevated inventory levels, placing some pressure on shipping demand for 2025. On the supply side, the anticipated growth of fleet capabilities, especially among ultra-large and handy-sized vessels, is likely to further exceed demand increases globally
Although the impacts on freight rates can fluctuate by vessel type and region, a common expectation leans towards a sluggish growth environment marked by downward pressures overall.
On the domestic front, the port sector appears to be one of the more promising areas within the shipping segments of 2025. Encouragement from regulatory policies designed to promote the consolidation of port resources is poised to mitigate redundancy and superficial competition among ports within the same regionsTo date, the ongoing integration of provincial ports continues to progress and is expected to generate growth within the industryMoreover, as China's economy remains primarily export-led, ports—being the critical terminals for cargo and container throughput—are likely to expand further.
In conclusion, a retrospective glance at the shipping market of 2024 reveals a starting consensus that the year could yield poor performance across many shipping sectors