Container Freight Market: A Game of Snakes and Ladders

The evolution of the global container shipping market, from price fluctuations, the impact of US trade policy, to the restructuring of shipping alliances and the development trend of container fleets in the context of a volatile world economy.

Container Freight Market

The container freight market in recent years has been like a game of snakes and ladders. Shippers move on the “trade chessboard”, hoping to move forward steadily. Sometimes, freight rates escalate suddenly, as when the pandemic and the crisis in the Red Sea caused shipping costs to skyrocket. But sometimes the market slides on a “snake”, pushing freight rates back to their long-term average.

In January this year, the Houthi forces in Yemen announced a halt to attacks on commercial ships flying most national flags. Expectations for freight rates (and futures) are waning as confidence in the Suez Canal from the Indian Ocean to the Mediterranean gradually recovers. Freightos assessed rates from China to the Mediterranean at $5,075 per FEU on January 24, down 4% from the previous week and 11% over four weeks. On the China-North Europe route, rates were $4,122 per FEU on January 24, down 12% from January 17 and 17% from December 27.

A bigger “snake” awaits rates in Washington D.C., where Donald Trump continues to threaten tariffs on foreign goods. The bulk of U.S. non-energy imports are shipped in containers, leaving the trans-Pacific market most exposed. Last year, the US imported 28.2 million TEU containers, up 13% from 2023. Of that, about 40% of the goods originated from China. In December alone, the US imported 2.38 million TEU containers, nearly reaching the maximum capacity of 2.4 million TEU/month, and the third month in history that imports exceeded 2.3 million TEU. Imports from China reached 903,000 TEU, up 1.7% from the previous month and up 14.5% from the same period last year - a number that "Darth Orange" (referring to Trump) is certainly not happy about.

Despite the huge import volume, freight rates from China to the US West Coast fell from an average of $5,200 per FEU in November to $4,300 per FEU in December. However, in January, freight rates climbed to a new high, averaging $5,528 per FEU. On the China-US East Coast route, freight rates averaged $5,500 per FEU in November, rising to $5,700 per FEU in December and then to $6,801 per FEU in January. Control of the Panama Canal is unlikely to reduce these rates. Previous efforts to re-industrialize the US have not been particularly successful and have failed to curtail the flow of imports, so new tariffs are likely to be imposed soon.

Since the global financial crisis, the US GDP has nearly doubled from $14 trillion to $28 trillion. Over the same period, the EU’s GDP has increased from $16 trillion to $18 trillion. The EU’s largest economy, Germany, is entering its third consecutive year of recession. The European Commission recently released a lengthy report that blamed the stagnation on a lack of intra-bloc competition and too many administrative barriers. To address the problem, President Ursula von der Leyen has proposed promoting pan-European policies, including a single capital market. Whether this will work remains a big question mark.

Meanwhile, trade data remains dismal. European container exports in December 2024 are estimated at 2.27 million TEU, down from 2.30 million TEU in November and 2.35 million TEU in December 2023. Total exports for 2024 are estimated at 27.6 million TEU, up from 27.2 million TEU in 2023 but still below the 2018-2022 average of 29.9 million TEU. The EU’s main export market is North America, where westbound transatlantic rates fell 14% from December 27 to $2,172 per FEU on January 24. The average rate since the beginning of January is $2,212 per FEU – the lowest since September 2023 ($1,841 per FEU). On the eastbound trade, average rates hit $600 per FEU in January, the highest since October. Trump will certainly want to narrow the gap further.

The first quarter of this year saw a restructuring of several shipping alliances. Maersk left the 2M alliance with MSC to join the Gemini partnership with Hapag-Lloyd. Hapag-Lloyd left THE Alliance, where MSC will join Ocean Network Express (ONE), HMM and Yang Ming on the Asia-Europe trade. The group will be renamed the Premier Alliance next month. The Ocean Alliance (comprising COSCO, OOCL, CMA CGM and Evergreen) is the only group to retain its membership from February 1 and is forecast to have the largest market share and the widest coverage this year, according to analysis from Linerlytica, an Asia-based container shipping consultancy.

The time charter market is also active as carriers restructure their strategies. Meanwhile, the global fleet continues to expand. As of mid-January, Alphaliner reported 7,226 container ships in service with a total capacity of 31.65 million TEU. Of these, 6,327 were dedicated vessels, accounting for a total capacity of 31.23 million TEU. The fleet has been growing by about one vessel per day since 2023, and newbuilding orders continue to rise, led by CMA CGM and Cardiff Marine. In an increasingly fragmented world of trade blocs, war zones and shifting supply chains, what is the right size ship to invest in? And with ever-tightening emissions regulations, what fuel is the best choice? Ship owners may need the wisdom and agility of the snake in Chinese astrology to answer these questions.

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