container ships

Sea freight situation and outlook for 2025

Dec 9, 2024 | , , , , , , , ,

With 2024 characterised by elevated freight rates and fluctuating dynamics, the container shipping lines have emerged as the primary financial beneficiaries, leveraging rate increases and stabilisation efforts to maintain profitability.

The outlook for 2025 presents a mixed landscape of opportunities and challenges, driven by shifting demand patterns, increased capacity, and geopolitical uncertainties.

Current market dynamics
Freight rates remain significantly above pre-crisis levels. Despite a gradual downward trend in global head-haul rates, the market has stabilised, suggesting a potential period of relative equilibrium in the coming quarters. 

Recent general rate increases (GRIs) by Asia-Europe carriers have demonstrated success, with rates on key routes from Asia to Europe rising by over 20%.

These elevated rates are expected to persist until the Chinese New Year in late January 2025. However, the seasonal decline in demand and the introduction of new alliance networks in February may present an opportunity for shippers.

Supply chain and capacity dynamics
Global shipping capacity grew by nearly 5% in Q3 2024, supported by minimal fleet idling and increased vessel activity. Ships previously affected by Suez Canal disruptions have returned to regular service, further bolstering capacity.

Nevertheless, the risk of overcapacity looms large. Continued vessel deliveries, combined with low scrappage rates, may necessitate fleet rationalisation if demand weakens. Carriers remain bullish, adding capacity to secure competitive positioning despite potential imbalances.

Outlook for 2025
The sea freight market in 2025 is expected to face moderate demand growth, projected at around 3-4%, though low consumer confidence and increased import tariffs in key markets, particularly the United States, may temper this growth. Additionally, manufacturing indices in major regions, including China and Europe remain suppressed limiting demand potential.

Geopolitical uncertainties will continue to shape the market. Ongoing negotiations in U.S. East and Gulf ports could lead to disruptions if unresolved by the 15th January 2025, while tensions in the Red Sea pose potential risks to key shipping routes.

Trade policy remains a critical factor, with proposed tariff increases in the United States potentially reshaping containerised cargo flows, particularly on Asian export routes. Meanwhile, the temporary rerouting of vessels around the Cape of Good Hope has absorbed some capacity, but a return to normal operations through the Suez Canal could intensify supply-demand imbalances.

As geopolitical risks and market disruptions continue to loom over the industry, maintaining resilient supply chains and budgeting effectively will be key priorities for shippers navigating the complexities of 2025’s sea freight landscape.

In a volatile sea freight market, our fixed-rate agreements on popular shipping routes reduce risk and provide essential budgetary certainty. 

To explore how Metro’s fixed-rate options could support your business in 2025, please EMAIL chief commercial officer Andy Smith.

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The potential impact of the new US administration on global trade

Nov 27, 2024 | , , , , , , , , , , , , ,

As the United States, and the world, braces for potential shifts in trade policy, new tariff proposals and ongoing supply chain challenges are reshaping the global logistics landscape.

President-Elect Trump’s threatened trade tariffs, along with geopolitical and operational pressures, are driving significant changes in import patterns, freight rates, and supply chain strategies.

Protectionist policies
President Trump’s first administration was marked by aggressive trade policies, and his second term is marked by a resurgence of tariff-based strategies targeting China and other major trading partners. Proposed tariffs include a universal rate of 10-20% on all imports to the US, with an additional 60-100% on imports from China, together with another 10% above any additional tariffs, on all products, until the supply of the illegal drug fentanyl ceases. 

These measures could significantly raise consumer costs for goods such as apparel, toys, furniture, and household appliances. In 2023, tariffs on Chinese apparel cost U.S. companies and consumers $1.3 billion, with forecasts estimating that consumers would pay between $13.9 billion and $24 billion more annually due to the proposed tariffs.

Additional tariffs could reduce trans-Pacific shipping volumes, while supply chains may diversify further to Southeast Asia, India, and Latin America. These shifts would alter global shipping patterns and potentially lower container shipping demand from Asia.

Surge in imports ahead of tariffs
The prospect of new tariffs is expected to accelerate import activity, as businesses aim to pre-empt the potential cost increases by expediting shipments, placing substantial demand on vessel space. This surge, if realised, would exacerbate pressures on an already strained logistics infrastructure, particularly during peak seasons.

Volatility in sea freight rates
Tariff-driven demand spikes are poised to push freight rates higher, especially on trans-Pacific routes. Companies, wary of increasing costs, are likely to explore alternative sourcing locations outside China, though this has been complicated further as the US president-elect said he would sign an executive order imposing a 25% tariff on all goods coming from Mexico and Canada, after being inaugurated on 20 January 2025. The impending early Chinese lunar new year in late January 2025 further compounds the uncertainty, as shippers rush to secure capacity.

Heightened supply chain challenges
Labour disputes continue to threaten North American supply chains, with the potential for an International Longshoremen’s Association (ILA) strike if negotiations do not conclude positively by January 2025. Concurrently, recent lockouts at Montreal and Vancouver ports have disrupted trade flows, with ripple effects expected at other ports, including Halifax.

A second Trump administration may prioritise renegotiating or withdrawing from international trade agreements to favour US interests, including potential revisions to WTO agreements. Such moves could disrupt North American trade flows and create further uncertainty for global shipping stakeholders. Additionally, heightened geopolitical tensions could impact critical maritime routes and alliances, particularly in the South China Sea.

The combination of tariff uncertainties, labour disputes, and shifting sourcing strategies signals a challenging period for global trade. Rising costs and operational complexities could challenge shipping in the long term, with broader implications for economic stability.

As the situation in the United States develops we will continue to provide regular updates, but if you have any concerns or questions about how these events might impact your shipments, please reach out to us.

EMAIL Chief Commercial Officer, Andy Smith today to learn how we can safeguard your supply chain during challenging periods.

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Air freight faces prolonged capacity constraints amid rising demand

Nov 13, 2024 | , , , , , , , ,

The tightening capacity situation could continue for several years, with constrained availability of freighter aircraft and high demand driving up rates across key routes.

While air cargo demand has not yet surged during this year’s peak season, rates remain elevated due to the limited capacity available, particularly on export lanes from Asia to Europe and North America. Looking ahead, supply chain pressures are expected to persist as new aircraft production delays and sustainability regulations further restrict capacity growth.

Steady rate increases
Despite a quieter-than-anticipated peak season, air freight spot rates have seen steady increases on major trade routes in October. Spot rates out of Asia showed notable increases, with outbound rates from Hong Kong rising by more than 8% month-on-month and over 10% compared to last year. Shanghai showed an even stronger performance, with rates increasing by over 12% month-on-month and over 22% year-on-year. Other Asian markets, including India, Vietnam, and Thailand, have also seen sustained rate increases, reflecting strong export demand and constrained capacity.

While the peak season leading up to major holidays like Thanksgiving and Christmas has not delivered the significant rate spikes anticipated, the rise in prices signals a solid demand foundation.

Long-term capacity shortages expected to intensify
As the air cargo market looks beyond the current year, long-term capacity shortages are likely to become an enduring feature. Boeing’s production challenges and limited feedstock for aircraft conversions have constrained the introduction of new freighter capacity, while delays in new technology, such as Airbus’s A350 freighter and Boeing’s 777-8 freighter, further tighten the timeline for expanded availability. The first A350 freighter is now expected in late 2026, and production of the 777-8 freighter remains uncertain.

Additionally, the International Civil Aviation Organization’s (ICAO) 2028 emissions standards deadline is anticipated to impact freighter availability. These standards will limit the production of certain aircraft types, likely exacerbating the capacity shortage. As capacity remains restricted, competition for available space will drive rates higher.

The air freight sector faces an extended period of rate volatility and capacity restrictions that may last well into the decade.

Our block space agreements (BSA) and capacity purchase agreements (CPA) protect space and capacity on the busiest routes, so we can fly your cargo at the best rates.

Regardless of your cargo type, size and requirements, we have extremely competitive rate and service combinations, to meet every deadline and budget.

EMAIL Elliot Carlile, Operations Director, for insights and prices. 

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November: North American market update

Nov 13, 2024 | , , , , , , ,

The North American freight market faces a complex set of challenges as ongoing labour disputes, potential trade policy shifts, and evolving service offerings reshape the landscape.

Canadian port strikes strain supply chain
Labour disputes have disrupted operations at Canada’s east and west coast ports, with significant impacts on supply chains. At the Port of Montreal, the Maritime Employers Association (MEA) imposed a lockout after the Longshoremen’s Union CUPE Local 375 rejected their offer, halting operations since 31st October. On the west coast, stalled negotiations between the International Longshore and Warehouse Union (ILWU) and port authorities in Vancouver and Prince Rupert effectively paralysed these critical gateways for Canadian imports and exports.

The closures forced Canadian freight to be diverted to US west coast ports, including Seattle, Oakland, Los Angeles, and Long Beach, adding to congestion and creating backlogs that could take months to resolve.

Government intervenes to resume operations
In a decisive move on the 12th November, the Canadian government directed the Canada Industrial Relations Board (CIRB) to end the strikes at Vancouver and Montreal and impose binding arbitration. While business groups welcomed the intervention, union representatives criticised the move, arguing it undermines workers’ rights.

As operations begin to resume, the Montreal Port Authority announced plans to gradually clear terminal backlogs and restore fluidity, although it could take weeks to return to normal. Meanwhile, Vancouver’s container terminals remain delayed, with limited anchorage availability adding further challenges.

US east and gulf coast strike uncertainties persist
Following a brief three-day strike in October on the US east and Gulf coasts, concerns remain about potential further disruptions. The strike’s conclusion hinged on a provisional wage agreement between the International Longshoremen’s Association (ILA) and the United States Maritime Alliance (USMX), with more complex issues such as automation still unresolved.

Negotiations resumed with a new contract deadline of 15th January 2025, but ended early on the 12th November, when the ILA broke off talks with the USMX. According to ILA, the decision was made after USMX continued “pushing automation and semi-automation language in its Master Contract proposals that will eliminate ILA jobs.” The ILA added it “remains hopeful that USMX will alter its un-winnable strategy, and resume negotiations as soon as possible.”

The uncertainty surrounding contract outcomes is likely to push shippers to expedite shipments before January, amplifying capacity constraints across North American ports. The October strike impacted trans-Atlantic and Asia-US trade lanes, with trans-Atlantic westbound volumes falling by 15% and Asia-US east coast capacity expected to drop 17% in mid-November.

Potential tariff escalation under new US administration
The US presidential inauguration in January may bring significant trade policy changes, with proposed tariffs that could reach 60% on China and 20% on other countries.

While the EU, which has a $130bn trade surplus with the US, is preparing counter-tariffs, the UK, which enjoys a relatively modest surplus, appears unlikely to retaliate, favouring open trade instead.

This potential tariff escalation could lead to intense front-loading of shipments before January, creating a pre-inauguration shipping peak, which might align with the pre-Lunar New Year demand surge.

Metro’s expanding US focus
The United States is Metro’s 2nd largest origin/destination and client location, with a large number of customers also having their head office located in North America.

To better support this large and growing client base, Metro will open its first office in the US next year. The non-operational office will focus on local American customers, to enhance the level of service and support provided to them, including the oversight of 3rd country movements through the Americas.

In-house shipping line offers Express US service
Wholly-owned group subsidiary, Ellerman City Liners, has launched the weekly sailing United States Express Service (USX), delivering some of the fastest containerised transit times available. Direct to Philadelphia from just 13 days, USX utilises non-congested ports and terminals, to streamline port clearance and inland movements.

USX is the only direct service operating to and from Jacksonville, serving the Baltic, Scandinavia, Europe and the United States, with four calls on the East Coast, including Philadelphia.

Ellerman’s USX service offers fast and reliable transit times, with lots of flexibility and operates in cooperation with MSC. It is gratifying to see our group working closely with the world’s largest carrier, which underlines our continued commitment to supporting our partner carriers. Many of whom we have worked with for decades.

As North America’s sea freight market adapts to labour uncertainties and fluctuating trade policies, shippers face a complex landscape of demand pressures, capacity constraints, and fluctuating costs.

To discuss the current situation and how Metro can support your North American supply chain, please EMAIL Andrew Smith, Chief Commercial Officer.

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