This is not a time for rest in shipping companies' sales services. The race for cargo is in full swing, as 2025 traditional peak summer season cargo levels have proved disappointing on both Asia-Europe and transpacific routes.
The general rate increases announced by the shipping companies since June have not stuck. Even with the Cape of Good Hope route still in service and the use of blank sailings, supply overall is exceeding demand. The shipping companies are limiting sales to about 70% of ship capacity but are still short of freight.
Economy plans are to be expected from the shipping companies after the holiday break, with freight rates down to the low levels of autumn 2023, prior to the increases which followed the market disorganisation provoked by the Houthi attacks on shipping in the Red Sea.
Source : Upply Freight Index
The transpacific market was the first to catch a cold but the bug has started to spread to Asia-Europe routes. Freight rates have fallen to below USD3,000 per 40' container on direct China-Europe sailings.
Source : Upply
In the westbound transatlantic market, we estimate that the new customs duties introduced by the United States could lead to a 5-10% contraction in cargo volumes on the French market in the third quarter, compared to normal levels during this period. The reductions in duties on certain chemical products and in the aviation sector as part of the trade agreement concluded in July between the European Union and the United States should limit the damage. On the other hand, in the luxury and wines and spirits segments, operators are going to have to collectively eat into their profit margins to keep retail prices at an acceptable level. It is often said that the luxury business is able to play on the desirability of its products among its top-drawer customers and is thus less sensitive to price increases on its basic products, but this is only partly true. The sector is struggling in 2025, moreover, according to a study from Bain & Company.
In the face of this general morosity, Maersk and Hapag-Lloyd, via the Gemini alliance, aim to differentiate themselves by offering a higher quality of service to justify rate increases. This approach is having some success with major shippers receptive to the quality argument but these are few and far between.
At the same time, on the wider market, MSC, which accounts for 20.8% of global container capacity, according to Alphaliner's Top 100 ranking, is playing its role, hoovering up cargo with the backing of a number of major forwarders and faithful big shippers. Ocean Alliance and Premier Alliance members are following suit with a slight time lag, which will have a greater impact on their results proportionally in the short term.
After a first quarter which was markedly better than initally budgeted for, the global shipping companies saw a slowdown in the second quarter, as is illustrated by the results of the three major European carriers, not including MSC which does not publish its financial results.
In a weak demand environment, in which importers have placed their orders early to try to avoid higher customs duties, the worst case scenario for the shipping companies would be a rapid increase in fuel prices. Fuel still accounts for 20-25% of operating costs. A big increase in price, therefore, would weigh heavily on operating results, which are already under pressure.
At the moment, it is very difficult to see how oil prices are likely to evolve. The new sanctions adopted against Russia by the European Union and the United Kingdom in July, which were directed particularly against Russia's phanthom tanker fleet, could push prices up. The market has not reacted much to the announcement of these measures, however. Conversely, the increase in supplies from OPEC+ countries is exerting downward pressure on prices. This trend could be amplified, moreover, by diplomatic progress over the war between Russia and Ukraine and the Middle East conflict. The situation remains very uncertain, however, and some volatility can be expected, therefore, in the second half.
The major shipping companies could be tempted to improve their profitability by positioning themselves on shorter routes, with small, well-filled ships and frequent services. They will find well established local operators blocking their path, however, the same local operators who have often served as the traditional sub-contractors of the big shipping companies for their services and transhipments in and out of the major Asian hubs. Such is the case, notably, for PIL and Wan Hai.
India is another attractive market, even if it is currently under fire from the Trump administration as part of its negotiations over customs duties. The current US position is not line with the country's dynamic economic and demographic development but could change quickly.
This is precisely the problem facing company forecasters at the moment, as they try to gauge their 2025 results and prepare their 2026 budgets. Trade with the world's leading economic power is on fast shifting ground at the moment.