Shipping

Market Update Q1 2025: No.14

February 7, 2025

Happy Friday Everyone,

Here’s a quick market update today for you all to give you a little bit of insight into the upcoming tariff applications, capacity and vessel schedule changes along with some rate forecasting.

Tariffs

• Have further changed even today with Trump postponing the tariff application for "de-minimums" cargo (less than $800 commercial invoice) - USPS and DHL both had stopped booking packages over the weekend due to the tariff application but have resumed.
• Generally, all the cargo that was previously subject to the 25% tariff will now be subject to an additional 10% from China. There are no additional HTS codes or new commodities affected (so far)
• Dates of application are as follows:
• If shipment was loaded on export vessel and has ETD date of Feb 1st, 2025 and BEFORE, and if the ETA into U.S is between Feb 4th and March 7th will likely NOT have additional tariffs.
• From Mar 8th on, you would start expecting the additional 10% tariff (assuming there's no changes during this period).

Either way, we will have to wait for the system to be updated with these new Chapter 99 code and will continue to feedback information as things change.

Vessel delay & Equipment Status

Vessel delay: Average waiting time is 0-1 days. Vessel delay at average 3-5 days.
Equipment supply: No major equipment shortage is reported.

Market Information

So far, the market is playing out as we had expected, a very soft return from the Lunar New Year Holiday sparking some rate decreases through February as expected. Please note the blank sailings week 6 and 7 along with some roll pools in China to maintain full capacity on the vessels, but you don't need to be a mathematician to understand the carriers are fuller, because there are significantly less sailings

New demand data for cargo loaded in December 2024 have been released by Container Trade Statistics (CTS).

• Growth took an upwards turn in December as growth in global TEU reached 7.6% year-on-year which was the highest growth rate seen during 2024. This is numerical proof of the front loading we explained previously.
• Full year 2024 saw global TEU grow 6.2% which in itself is a very strong growth rate. Including the Red Sea effect, global TEU*Miles grew 25% compared to 2023.
• North American imports were a significant element in this strong global growth. North American import volumes in TEU grew 12% in 2024 compared to 2023. On the Pacific, we saw Far East to North America volumes grow 14.3%.
• This week’s WCI spot rate data from Drewry saw continued rate erosion. Rates from Shanghai to both Europe, USWC and USEC only seeped downwards slightly, but this might also be owing to low market activity on account of Chinese New Year.
• The restructuring of carrier alliances is causing a short-term capacity shift in the trans-Pacific, giving cargo owners about 20% more functional capacity this month compared with a year ago but still 8% less than in January, according to analysis by maritime intelligence firm eeSea.
• Following a request for additional information, the FMC has now issued a statement that the Premier Alliance will take effect from February 9th.

-The agency said Thursday that the Premier Alliance agreement among the three carriers will take effect on Feb. 9, six months after the liners announced their new partnership.

-The Premier Alliance takes over the trades handled previously by THE Alliance, which disbanded after former partner Hapag-Lloyd left to align with Maersk in the new Gemini Cooperation alliance that launched Feb. 1.

• Today is day 444 of the Red Sea crisis. A statement from the Houthies unsurprisingly rejects the idea of displacing all Palestinians out of Gaza and letting Americans take over. Shipping lines and shippers might therefore be faced with a very protracted Red Sea crisis should the US and Israel go ahead with this plan.

-Beyond this, we don't expect the ocean carrier routings to come back through the Suez canal anytime soon. Even without the attacks, it does help the carriers manage what would be a significant over capacity situation and keep the market from crashing.

Maersk has released their 2024 annual results

For the Ocean division:

Annual EBITDA was 9.2 Bn USD. EBITDA margin is 24.6%. Hapag-Lloyd was 24.2% and ONE was 31.2%. Some of you may remember the "good old days", when carrier margins were in the 5% range and they were rarely profitable. I do feel like we may not see those days again, however, if we do it will be this year or next year based on what we believe is the supply demand curve moving in the direction of the shipper/consigneeOcean for Q4 specifically:Volume up 0.8%. Global market was up 5.3%. Hapag-Lloyd was 3.3% and ONE was 4.5%.Freight rate up 38.1%. Global market was up 38.6%. Hapag-Lloyd was 31.4% and ONE was 38.1%.

As always, it is going to be a very interesting year with lots of changes and challenges to navigate. We look forward to working through it together - have a wonderful weekend everyone!

Author
Matthew Crocker / CCO