January 2, 2025 | Source: Caixin News
The container shipping market in 2024 saw significant volatility, primarily driven by unexpected events. As the year came to a close, potential strikes by dock workers on the U.S. East Coast led several shipping lines to announce rate hikes. Rates for U.S. West Coast routes rose by 70% compared to early December.
Uncertainty for 2025 Shipping Market
Experts predict that 2025 will bring further uncertainty to the shipping industry. Besides the looming East Coast dock worker strikes, other factors like the official start of the “Twin Stars” alliance, Middle Eastern geopolitical tensions, and potential changes to U.S. tariff policies are expected to impact the market. Industry insiders foresee weaker rate movements overall.
2024 Container Shipping Rate Volatility
Container shipping rates experienced high volatility in 2024. European routes, especially, saw significant fluctuations due to tensions in the Red Sea and strong demand. According to the Ningbo Shipping Exchange (NCFI), rates peaked in mid-July, with the NCFI index hitting 3726.07 points. However, rates have since declined from their highs.
Currently, the NCFI index for European routes stands at 2059.4 points. It rose by 0.4% compared to last week, indicating a stable market. Qian Hanglu from the Ningbo Shipping Exchange explained that European markets saw good cargo movement, and shipping lines are maintaining rates while preparing to increase prices in early January.
South American Eastbound Routes Perform Stronger than U.S. and European Routes
South American eastbound routes, particularly to Brazil, experienced strong demand in 2024, boosted by the electric vehicle sector. Spot rates show notable increases on U.S. West Coast routes. For example, Extreme Technology’s data on December 27 showed a significant rise in rates from Shanghai to Los Angeles and Long Beach. Rates increased from $2,258 to $6,813 per 40-foot container (FEU) earlier in December to $4,258 to $8,913 per FEU by December 27. Rates from Shanghai to Rotterdam remained steady at $4,629 to $6,825 per FEU.
U.S. East Coast Labor Strikes Add Pressure to the Market
The rise in rates for U.S. West Coast routes is largely due to the approaching second strike by East Coast dock workers. As labor negotiations remain unresolved, shipping companies are preparing for potential disruptions. To mitigate risks, Hapag-Lloyd announced a Work Disruption Surcharge (WDS) and Work Interruption Destination Surcharge (WID) for potential strikes. These surcharges will take effect on January 20, 2025, with a fee of $850 per TEU and $1,700 per FEU for WDS, and the same fees for WID.
Zim Shipping also announced a $1,000 per TEU and $2,000 per FEU surcharge for shipments to/from U.S. East Coast and Gulf ports starting January 10, 2025.
Uncertainty Ahead: New Alliances and Geopolitical Risks
Looking ahead, experts remain cautious about the market in 2025. Key uncertainties include the formation of new shipping alliances. In February, Maersk and Hapag-Lloyd’s “Twin Stars” alliance will begin operations. At the same time, MSC will continue its independent operations and collaborate with ONE, YML, and HMM in the Premier Alliance. Additionally, the Ocean Alliance will remain intact, but differing strategies in response to geopolitical tensions could influence rate fluctuations.
Moreover, the Middle Eastern geopolitical situation and the impact of U.S. tariffs remain unpredictable. Starting January 1, 2025, the EU will implement stricter regulations on greenhouse gas emissions from shipping, including the FuelEU Maritime initiative and the expansion of the EU Emissions Trading System (ETS). These policies will likely raise operational costs across the industry.
Cosco’s Stability Amidst Uncertainty
China COSCO Shipping Corporation (COSCO) has extended its Ocean Alliance cooperation through 2032, ensuring long-term stability in its alliances. COSCO has also signed contracts for 12 new 24,000 TEU methanol dual-fuel vessels to comply with EU environmental regulations. Experts believe that COSCO’s stable alliance structure will allow it to offer reliable services and increase its market share as competition intensifies.