Sea freight in flux: current pressures and the 2025 outlook

The global sea freight market is navigating turbulent waters as 2024 draws to a close, with recent months marked by capacity miscalculations, strikes, and geopolitical tensions.

Carriers have struggled with overcapacity on major routes, particularly on Asia-North America lanes, where near-record demand has been met with a 20% capacity increase compared to early 2024. Despite attempts to manage this by blanking sailings, spot rates have softened steadily, suggesting that supply has overshot demand. On the transatlantic, however, rates bucked the trend, rising by nearly 30% earlier in the year due to front-loading of cargo and ongoing capacity constraints.

In an already complex environment, short-term labour disruptions are adding further strain. The recent three-day strike by longshore workers on the US East Coast drove importers to reroute shipments to West Coast ports, contributing to record-high import volumes at Los Angeles and Long Beach. This diversion has led to elevated rail dwell times, pushing up costs and increasing pressure on already-stressed West Coast infrastructure. As the potential for further strikes looms, shippers are bracing for continued volatility in both rates and service reliability across North American trade lanes.

Looking ahead
The challenges of 2024 are likely to carry over into 2025, as new risks emerge and existing issues persist. Approximately three million teu of new capacity is set to enter the market next year, which would typically relieve pressure on rates. However, geopolitical factors and complex market dynamics suggest that rates will remain elevated compared to pre-pandemic levels, even if some softening is expected in certain lanes. Key issues like the unresolved Red Sea conflict will likely keep alternative routes around the Cape of Good Hope in play until at least 2026, sustaining longer transit times and higher operating costs for carriers.

Drewry warns that potential strikes on the US East Coast in early 2025 could trigger inflationary pressures across multiple trade routes. In the absence of strikes, some rate relief might occur, but cost pressures from other factors, such as the increased emission trading system carbon taxes, which will increase by 75% from January, could sustain above-average rates. Meanwhile, new alliance configurations, set to roll out in Q1, could introduce service disruptions as carriers adjust to revised schedules and transhipment routes.

The geopolitical landscape remains a significant wildcard for 2025 and potential new US tariffs on Chinese goods could drive up freight rates as shippers move to front-load imports, while growing demand from China to Mexico as an indirect entry point to the US may also impact capacity and pricing.

In this volatile environment, shippers are advised to lock in rates where possible, taking advantage of our fixed-rate contracts. With elevated costs and continued instability likely, a proactive approach to managing logistics spend and securing reliable capacity will be crucial for maintaining supply chain resilience and budget stability.

For personalised support in strengthening and securing your ocean supply chain, please EMAIL Matt Fullard.