Maritime 2025 Annual Review & Outlook
Taking the long way
Red Sea to dominate Asia-Europe ocean trade again in 2025
By Greg Knowler
The big picture : The Red Sea crisis will continue to impact service levels , rates and shipper-carrier relationships on the Asia – Europe trade for the foreseeable future . While the diversion of vessels away from the Suez Canal starting in late 2023 came as an unpleasant surprise for shippers — and a welcome relief for heavily oversupplied carriers — the industry enters 2025 with the longer voyages firmly established in ocean schedules . mitigate delays , which led to an early start to the peak season , quickly filled all available capacity and saw carriers slashing agreed volume allocations while charging huge premiums to guarantee loading . The peak season also came to an early end , but even as volumes slowed into the fourth quarter , the longer voyages continued to disrupt schedules and kept short-term rates well above prior-year levels . Through mid-December , spot rates from Asia to North Europe averaged $ 5,067 per FEU , nearly four times the $ 1,312 per FEU average recorded for the full year in 2023 , according to Platts , a sister product of the Journal of Commerce within S & P Global .
A look ahead : When carriers can resume Suez Canal transits is the single largest question mark hanging over the Asia – Europe trade going into 2025 . It will determine the structure of annual contracts , rate levels , shipper transportation costs , seasonal cargo flows and carrier profitability . Carriers have penciled in a return to the Red Sea for the second half , and some analysts are also using that as a baseline for their market outlooks , but the reality is that no one knows . Should the mid-year prediction be correct , it will immediately see the estimated 10 % of excess capacity soaked up by the diversions
A look back : As 2023 drew to a close , carriers were bracing for battle with a familiar foe : overcapacity . The container ship order book had grown to almost 30 % of the in-service fleet and new , larger ships were steadily sailing into service on the Asia – Europe trade . A precipitous rate decline appeared to be virtually guaranteed , and carriers were preparing to blank sailings , slow steam , and idle and scrap ships to manage capacity . But Houthi militant attacks on commercial shipping in the Red Sea completely flipped the supply-demand picture , forcing carriers to divert vessels around southern Africa — sending spot rates through the roof and all prior capacity management plans out the porthole . To offset the longer route adding about two weeks to transit times , carriers deployed everything that could float , which in turn caused severe port bottlenecks at both ends of the Asia – Europe corridor , further reducing effective capacity . European importers advanced orders from Asia to try to
Red Sea crisis keeps Asia-Europe rates well above 2023 levels
Container spot rates from Asia to N . Europe and Mediterranean , in USD per FEU
USD per FEU
$ 9,345
$ 8,000
$ 6,000 $ 10,000 $ 4,000
$ 2,000
$ 0 LJan 2023 Apr , 2023 Jul
Jan 2024
North Asia to UK Continent
Jul North Asia to Mediterranean
Asia – Europe spot rates in 2024 were nearly four times higher on average than in 2023 . Shutterstock . com around Africa returned to the market and rate levels will quickly come under downward pressure . That pressure , however , may not be as severe as initially thought , with cash-rich carriers vowing to pull hard on several levers at their disposal to limit the capacity overhang . In addition , carriers are expected to increase scrapping , with an estimated 3.4 million TEUs of capacity over 20 years old , increased blank sailings that can quickly withdraw capacity and growing numbers of idle vessels . Shipowner association BIMCO projects Asia- Europe headhaul volume will grow between 3 % and 4 % against capacity growth of 6.7 % in 2025 .
The next inflection : While the Red Sea diversions look set to prevail , at least through the first half of 2025 , volumes on those ships will be impacted by weak underlying economic growth in Europe . The region ’ s manufacturing sector is stuck in recession , with the EU ’ s major economies facing uncertainty over persistent core inflation , policy directions and geopolitical conflicts that are dampening the near-term outlook . Although European consumer confidence is edging higher , it remains significantly below pre-pandemic levels and will have a direct influence on retail sales and freight demand .
Source : Platts , S & P Global © 2024 S & P Global email : greg . knowler @ gmail . com
24 Journal of Commerce | January 6 , 2025 www . joc . com