The global maritime shipping sector faces mounting challenges as pricing power weakens amid shifting trade policies and increased vessel supply. This comes as companies negotiate annual shipping contracts while dealing with market uncertainties.
Freight Rates Drop Amid Tariff-Driven Surges
The ocean freight sector recently experienced heightened shipping activity, influenced by advanced cargo shipments ahead of anticipated tariff increases. However, with the surge dissipating, rates are coming under pressure. According to AlixPartners, many transpacific carriers held January spot rates steady, signaling diminished bargaining strength.
The Drewry World Container Index revealed a 10% decline in freight rates, with the cost of a 40-foot container falling to $2,795 as of February 20.
Major Shipping Players Adjust Strategies
In response to market conditions, MSC, the world’s largest container shipping company, suspended its Asia-U.S. West Coast Mustang service. Industry expert Lars Jensen noted freight rates to the U.S. coasts tumbled approximately 18% in the past week.
Meanwhile, Danish shipping giant Maersk reported strong financial results, showcasing a 49% increase in freight revenue in Q4 2024. Despite this, forward-looking concerns remain, especially with the entry of new vessels into service.
Red Sea Trade Route Uncertainty
A potential reopening of the Red Sea route, currently diverted due to geopolitical risks, could further pressure prices. Carriers added 162 vessels to their fleets in response to longer transit times, creating surplus capacity that could flood the market should normal routing resume.
While no official timetable exists for a return to the Red Sea, discussions surrounding trade negotiations and political developments could influence future decisions, affecting global shipping dynamics.
Industry Alliances and Capacity Expansion
The emergence of new shipping alliances and MSC’s decision to operate independently introduces another layer of complexity. The newly formed “Gemini” alliance, comprising Maersk and Hapag-Lloyd, reflects an evolving industry landscape.
According to Alphaliner, vessel-sharing agreements accounted for 81% of global maritime capacity. The revised structure could lead to more competition and downward pressure on pricing.
Economic Repercussions Beyond Ocean Freight
The broader supply chain, including trucking, rail, and air freight, is also feeling the impact. As ocean freight orders decline following earlier front-loading, complementary transport sectors are seeing lower demand.
The trucking sector, recovering from a prolonged freight downturn, remains cautious. Landstar System’s recent earnings call suggested a “slow and steady” recovery rather than a sharp rebound in freight demand.
Looking Ahead
With 205 new ships scheduled for delivery in 2025, experts caution that excess capacity could weigh on rates. At the same time, geopolitical factors and evolving trade policies remain key variables in determining the trajectory of the industry.
Should tariffs further disrupt supply chains, or if Red Sea access revives, shipping companies may need to brace for even more aggressive pricing competition in an already softening market.
