Asian Container Lines Face Profit Slump Amid Weakening Demand and Overcapacity

Following a short-lived boom driven by tariff front-loading, Asian container lines are projected to face declining profits in the second half of the year due to weakening demand and a supply glut.

container vessel

A sharp drop in ocean freight rates is likely toward the end of 2025 after a tariff-driven demand surge in the second quarter pulled forward volumes from the traditional third-quarter peak season.

The transpacific trade flourished during the U.S.-China tariff 'truce,' with freight rates surging in June. As shipping capacity recovered, smaller carriers like China United Lines even began resuming transpacific services after a period of absence.

Philip Damas, managing director and head of Supply Chain Advisors at Drewry Group, said the remainder of the year will likely be more subdued due to weaker trade growth amid still-weak market sentiment, and that the early shipment of volumes could trigger deeper rate corrections.

Financial reports from Japanese carriers are suggesting the peak may already be over, with Mitsui O.S.K. Lines failing to impress investors as U.S. tariff threats hit its container shipping business, and Nippon Yusen K.K. cutting its full-year forecast due to currency fluctuations and tariff turmoil.

Meanwhile, Chinese rivals may be having a final hurrah before a harsher reality sets in, as front-loading and strong exports in the first half could boost carriers like Cosco Shipping Holdings. But signs of slowing trade in China after record volumes suggest the momentum from front-loading may be starting to wane.

A tariff reprieve merely postpones demand headwinds, HSBC analysts, including Parash Jain, wrote in a mid-July note. “Even worse, the accelerated vessel delivery schedule will collide with potentially weakening demand, exacerbating overcapacity."

From the third quarter onwards, transpacific container traffic is projected to fall, with only a slight seasonal uptick noted in the second quarter of 2026, Damas said. "The container shipping market is fundamentally in a cyclical downturn, with temporary rate spikes driven only by disruptive shocks rather than demand-side strength."

Beyond mainland China and Japan, Taiwan’s Evergreen Marine and Yang Ming Marine Transport could see full-year profits drop by more than half as trade uncertainties weigh. In Europe, A.P. Moller-Maersk and Hapag-Lloyd are also projected to continue their downward trend.

U.S.-China trade negotiations are progressing, and U.S. President Donald Trump is expected to make a final decision on maintaining the tariff truce with China.

But even what are considered favorable tariff levels could still pressure rates and volumes, said Damas, noting that the revised 15% tariff on Japan is still higher than a year ago and will likely reduce Japan’s overall containerized exports to the U.S.

"For China, it is too early to say how adverse the impact of revised tariffs will be on container lines," according to Damas. "There are signs that China exports to regions other than the US are growing fast."

China’s trade surplus hit a record in the first six months of the year as it seeks to diversify exports away from the U.S. and tap into Southeast Asian markets.

Somewhat shielded from the tariff noise, higher-growth markets like intra-Asia trade lanes are replacing the transpacific in terms of global importance amid such uncertainty, according to BI's Loh. Since March of this year, China-ASEAN export volumes are now double that of the China-U.S. route, which had been the most important lane in container shipping.

Drewry's Damas is also seeing container lines redeploying China-built vessels from U.S.-connected routes to non-U.S. trades, potentially to avoid fees expected to be imposed by U.S. authorities from October.

"We expect that container lines will cancel many more sailings, increase demolitions of ships and take other measures to manage over-supply in the second half of this year," he said.

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