Lunar New Year Closes with a Whimper

Some years end with a big bang, but this Lunar New Year was mild. The freight push from December and January has subsided, demand has softened, rates are dropping, and capacity is readily available. However, this is now the season for realigning carrier service strings and alliances.

To stabilize rates and prevent them from falling too low, carriers are increasing sailings. Combined with the hopeful reopening of the Red Sea, these factors will contribute to continued unpredictability in sailing schedules and transit times. Expect ongoing high levels of transit time variability.

Main Concerns

Red Sea Reopening

Reports indicate that the Red Sea and Suez Canal may soon reopen. This would restore significant vessel capacity as ships could once again transit directly through the Suez Canal, reducing transit times by two weeks compared to rerouting around Africa.

Reliability Impact of Carrier Alliance Changes and Blank Sailings

  • Two key risks threaten reliability: carriers realigning service strings and an increase in blank sailings used to control overcapacity and stabilize rates.
  • February and March are typically when carrier alliances adjust their service strings. Expect disruptions, especially as these changes coincide with blank sailings meant to counteract an oversupply of vessels.

Rates Analysis

Globally rates have generally declined since early January, and the forecast indicates further decreases through mid-February and beyond.

Carriers will use their blank sailing strategies to try to limit supply to prop up rates. Carriers and their alliances have become better and better at using this "tool" and closely following each other in the process.

NOTE: These trends are tracking the short-term/FAK rates. The past half year, contract levels have been well below short-term rates. In new contract negotiations, expect carriers to push up contract levels to the short-term levels. So even as the short-term rates are dropping now, contract RFPs now will likely push up to those levels.

Asia to Europe & Mediterranean

Red Sea Impact: The Red Sea reopening is critical for shipments to Europe, the Mediterranean, North Africa, and the Middle East. However, major container carriers remain cautious, wary of potential attacks. When normal operations resume, a significant increase in vessel capacity will challenge carriers as they attempt to manage rates through blank sailings.

  • The reduction in transit days around the Cape of Good Hope, combined with softening demand, is expected to drive rates lower despite blank sailing strategies.
  • Shippers and BCOs should anticipate unreliable sailing schedules due to frequent blank sailings. A missed sailing could result in week-long delays.

Asia to North Europe and Mediterranean

  • Demand: Softening post-Lunar New Year, with Northern European ports still experiencing congestion.
  • Rates: Down 35% from January 1 highs and 30% from December 1. Rates are expected to decline further as capacity increases. The reopening of the Red Sea will accelerate transit times by more than two weeks.

South Asia to Europe

  • Rates have been dropping steadily since early December, down 15% as of mid-February, with further declines expected.

Asia to U.S. / North America

Asia to U.S. East & Gulf Coasts

  • Spot/short-term rates have decreased approximately 15% from January 1 to February 16, with a continued downward trend.
  • Rates are still 5% higher than early December but are likely to decline further, particularly once the Red Sea route reopens.

Asia to U.S. West Coast

  • Rates have decreased about 35% since early January and are expected to continue falling.
  • Rates in mid-February remain nearly 20% higher than in early December 2024.

South Asia to North America

USEC

  • Since early December, rates have increased slightly (around 3%), but after a January spike, they have declined by over 10%.

USWC

  • Mid-February rates are roughly the same as in early December 2024, despite a brief January increase.

 North Asia to Australia

  • Rates have dropped 50% since December 1 and over 30% since early January.

Update on New U.S. Tariffs

  • China to the U.S.: An additional 10% tariff on all imports from China remains likely, though the timing is still uncertain and may depend on U.S.-China negotiations.
  • Mexico and Canada: A proposed 25% tariff on imports has been postponed until March 1, with expectations that a resolution will be reached to avoid its implementation. The prediction is that all three countries will come to a reasonable settlement.
  • Other Countries:
    • The proposed 10% tariff on all other imports has been replaced with a reciprocal tariff plan, where U.S. duties will match the import tariffs imposed by trading partners.
    • No timeline has been set for this initiative.
    • Example: If the EU imposes a 10% duty on U.S. automobiles, the U.S. would apply the same duty on EU-made vehicles. Reporting indicates that the US would take this approach with each country or trading group.
  • Trade Disputes: Other nations may impose retaliatory tariffs if the U.S. implements new duties. The full impact of these tariff adjustments may take months or even years to unfold.

Port Congestion Report

Ports experiencing high congestion levels include:

  • Europe: Hamburg, Rotterdam, Antwerp, London Gateway
  • U.S.: Charleston, Savannah

Conclusion

The industry consensus is shifting—carriers now hold more control over the market than shippers, BCOs, and forwarders. Over the past 25 years, carrier concentration has steadily increased, with the top ten carriers now controlling at least 80% of the market. Even more striking, MSC, Maersk, CMA-CGM, and the Cosco Group collectively manage nearly two-thirds of global container shipping. Additionally, the strategic use of blank sailings—taking vessels offline or rotating service cancellations—has become a powerful tool for carriers over the past five years.

The era of aggressive price wars and direct competition among carriers seems to be fading. Shippers and BCOs must adapt their strategies to navigate this new reality.

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