Ocean freight rates still dangerously low

BAROMETER. The shipping companies should be able to stay in profit in 2025, thanks to their performances in the first half. They are having to make savings, however, given the current level of rate levels on the major east-west corridors.

In the current post-holiday period, the shipping companies and non-vessel operating common carriers (NVOCCs) have taken up defensive positions. The contract market has enabled them to cushion a little the fall in ocean freight rates on the spot market but billing revenues have been eroded and fixed costs are continuing to increase. Most companies’ operating margins have fallen below 10%, something which has not happened since the pre-Covid era. Some less competitive lines are barely breaking even.

The financial equation is finely balanced, not to say unsolvable. For the shipping companies, the ideal would be to obtain a slight increase in freight rates and, at the same time, to return to the Suez Canal so as to bring about a substantial reduction in slot costs. However, a large-scale return to the Suez Canal, apart from the fact that it remains a highly uncertain prospect at present – as was demonstrated by the attack on the Dutch vessel, the Minervagracht) – would result in a further fall in freight rates.

This situation has led to some moroseness among vessel operators, who, apart from market factors, are having to deal with the imminent...