Market Conditions – February's import figures were quite strong, registering the second highest on record with over 2.2 million TEUs, a 4.7% increase compared to February 2024. However, this surge in volume was abruptly interrupted by the Lunar New Year. Following the holiday, the slow recovery of shipping volumes triggered a rapid decline in short-term market rates from the second half of February onwards. This significant drop in freight rates has prompted ocean carriers to rescind Named Account peak season surcharges, which had been in place since the beginning of the 2024 contract period.
The container shipping industry faces significant changes this season. Carrier alliance changes, including MSC's departure from its former 2M alliance partner Maersk, combined with the potential impact of escalating tariffs on consumer spending, creates uncertainty about second-half of 2025 volume projections through the peak season. The robust volume growth that began in the fourth quarter of 2020 may be ending. However, this does not signal a return to pre-pandemic behavior by ocean carriers. Instead, they are expected to actively manage capacity and adjust short-term rates to prevent unsustainable freight rate declines. As of March 17th, it appears we are approaching such a critical point.
Market Rates – Ocean freight rates have plummeted over 40% since mid-February, stabilizing around April 2024 levels. Despite this, ocean carriers have announced substantial general rate increases for April 1st, ranging from $1,000 to $3,000 per 40’ container, depending on the carrier. While expectations suggest the increases will lean towards the lower end of that range, a four-digit rise remains significant in a market with ample capacity. To bolster these rates before or if volumes return to pre-Lunar New Year levels, we anticipate a market wide surge in carrier blank sailings.
We expect ocean carriers to implement these increases by April 1st or, at the latest, April 15th. However, without a corresponding increase in shipping volume, sustaining these elevated rates will be challenging. It is reasonable to predict that by May 1st, rates will likely settle around the 2025 fixed rate levels.
2025 Fixed Rate Contract Season – Ocean carriers are beginning to announce significant freight rate increases for 2025. Early indications show average increases of 25-30% for shipments to the West Coast, compared to 2024 levels. Inland rail rates and shipments to the East Coast and Gulf ports are projected to rise by 10-15%. While these increases are substantial compared to historical averages, they remain considerably lower than the peak short-term market rates seen in the past two contract seasons.
With the recent “bull run” period of exceptionally high rates seemingly ending, importers may find a unique situation this shipping season. Short-term market rates are expected to be relatively close to fixed contract rates, potentially incentivizing importers to minimize volume commitments and leverage the flexibility of the spot market, especially given current volume uncertainties. We recommend a balanced approach. Over-reliance on either fixed contracts or the spot market can create unnecessary supply chain stress if rate differences remain minimal throughout the season.
West Coast Ports Rail Dwells Spike – Intermodal rail dwell times increased significantly in the first quarter, driven by high import container volumes that strained rail car supply at West Coast ports. This surge affected both U.S. and Canadian ports, with Vancouver experiencing particularly long dwell times throughout the 2024 shipping season. While U.S. ports generally fared better initially, Southern California ports, specifically Los Angeles and Long Beach, are now facing similar challenges, with average dwell times reaching seven days from container discharge to rail departure. With vessels currently departing Asia below full capacity, terminals and rail operators have an opportunity to reduce dwell times before the peak 2025 shipping season begins later this spring.
Don’t Expect Suez Services in 2025 – President Trump's recent ultimatum to Houthi leaders has expired, and the U.S. military has escalated attacks against the group over the past week. The U.S. government demanded the immediate removal of the blockade on international shipping, but the Houthis have ignored this, insisting instead on a lasting peace deal regarding Palestine. As a result, the waterway remains unsafe for the foreseeable future. Hostilities are expected to continue, with most shipping lines avoiding the Suez Canal, indicating another season of disrupted Suez-free shipping.
Global Port Congestion Increases – For the 2025 shipping season, ocean carriers plan to introduce approximately thirty six new weekly sailings from Asia to the U.S. Given existing port congestion, any disruption—whether due to weather, labor issues, or high utilization—could significantly impact trade flow. Recent examples include weather-related vessel bunching in Savannah, where ships waited at anchor for days, and congestion in New York/New Jersey, leading carriers to restrict empty container returns. Additionally, U.S. West Coast ports face rail congestion, which can cause container stacking and dwell delays of up to 30 days for rail-bound cargo.
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