Demand Trends: Slow Recovery with Post-Golden Week Momentum
The global ocean freight market is witnessing a complex recovery as demand patterns shift post-Golden Week. Despite overall cautious consumer sentiment and weaker global trade dynamics, some lanes are showing signs of resilience. For instance, Asia-Americas and intra-Asia trade routes experienced higher-than-anticipated demand spikes, though broader market PMI data reflect an ongoing contraction in output and new orders.
How does this impact the market? The sluggish economic environment, marked by lower export orders and constrained manufacturing growth, has underscored the need for carriers to adapt dynamically. While global trade has not returned to pre-pandemic levels, container shipping volumes are stabilizing in key lanes.
Capacity and Fleet Developments: Aging Ships and Record New Deliveries
A staggering 2.5 million TEUs (twenty-foot equivalent units) of new containership capacity were delivered in 2024, with an additional 0.5 million TEUs expected before year-end. However, this record-high delivery coincides with an aging fleet—2.6 million TEUs of capacity in ships over 20 years old. Despite rising maintenance costs, carriers have refrained from scrapping these vessels, choosing instead to balance fleet renewal with operational needs.
Interestingly, the low scrapping rates highlight a critical operational conundrum. With port congestion and vessel rerouting on the rise, including Red Sea chokepoints and increased fuel costs, many carriers are hesitant to retire older ships.
Freight Rates: A Rollercoaster of Peaks and Troughs
Ocean freight rates have been on a downward trend since their July peak, although they are beginning to rise again following Golden Week. This fluctuation is being driven by carriers’ inability to align capacity with slack-season demand. Carriers are now attempting to hike rates in November, but sustainability remains uncertain given prevailing market conditions.
Rates remain significantly elevated compared to the same period last year. The ongoing volatility, combined with the looming risk of capacity oversupply, has placed carriers in a precarious position. For shippers, this translates into uncertain cost structures and logistical challenges in securing space.
Regulatory and Geopolitical Pressures: Strikes and Green Transitions
Regulatory challenges add another layer of complexity. The USEC (United States East Coast) port strike that concluded on October 3 temporarily disrupted operations. While wage agreements have been reached, automation and other unresolved contract terms could lead to another work stoppage after January 15, 2025. In parallel, carriers are heavily investing in LNG-powered vessels amidst concerns about the availability of green methanol, a preferred alternative for meeting emission reduction targets.
Alliance Reshuffling: A Market on the Verge of Transformation
The ocean freight alliance landscape is set for a seismic shift as the 2M alliance between MSC and Maersk dissolves in January 2025. This move is already sparking strategic repositioning across carriers. MSC plans to operate independently on East-West trade lanes, while Maersk is collaborating with Hapag-Lloyd under the Gemini Cooperation framework starting February 2025.
Additionally, the extended OCEAN Alliance agreement through 2032 ensures continuity for its members, including COSCO, Evergreen, and CMA CGM. Meanwhile, THE Alliance is transitioning into the Premier Alliance, which will include Yang Ming, HMM, and ONE.
Market Outlook: Clouds on the Horizon
Looking ahead, uncertainties abound. From potential US tariff changes tied to election outcomes to disruptions during alliance transitions, carriers and shippers alike must brace for operational and financial impacts. Weather-related disruptions and bottlenecks in port infrastructure remain persistent threats. Despite these challenges, post-pandemic recovery trajectories suggest that freight rates are unlikely to return to historical lows anytime soon.
Source:dhl
