BAROMETER. The month of December has brought an end to a year which turned out more favourably than expected for container shipping operators. It brought handsome bonuses for the shipping companies and the big forwarders, even though their financial performance was more the result of geopolitical tensions than of the sector's intrinsic performance.
Three factors pushed up freight rates during the month of December:
- The decision of the shipping companies to deliberately limit capacity during the run-up to the Chinese New Year.
- A rush to get cargo loaded before the increase in customs duties announced by the future new administration in the United States.
- Uncertainty about the possibility of strike action at US east coast and Gulf of Mexico ports from 15 January on. Negotiations on a new six-year master agreement between the International Longshoremen’s Association (ILA) and the cargo-handling industry body, USMX, were deadlocked over the question of terminal automation. A tentative agreement was finally reached on 8 January.
It should be noted that two of these three factors are strongly influenced by the prospect of the arrival in power of the new Trump administration. In the port dispute, the president-elect has come out strongly in favour of the ILA.
The battle between supply and demand
The increase in freight rates on Asia-Europe and transpacific routes at the end of the year, with contract negotiations still under way, has been favourable to the shipping companies, which are looking to use current higher rates as a basis for the future rates still under negotiation. In December, with the battle between supply and demand in full swing, they were able to justify rate increases by playing on the fears of the cargo side that there would be insufficient capacity to meet demand.
But the wind could turn quickly. After the Chinese New Year, which falls early this year on 29 January, three new factors, which promise to have a much less favourable impact on the shipping companies' finances, look set to come into play:
- The three new shipping alliances are planning to simultaneously introduce big increases in capacity.
- If the United States implements plans to increase customs duties, companies there could delay placing new orders, causing a temporary slowdown in imports to the United States.
- The European retail sector is not in the kind of form which would enable it to make up for a heavy slowdown in imports to the United States.
If we take into account the development of nearshoring, which is palpable now in Europe, the outlook for the container shipping market in 2025 takes on a very different aspect. Although it was planned and intended to be temporary, the increase in freight rates in December looks likely to be the prelude to a roller coaster ride for freight rates, starting early this year.