Recent Decline in Ocean Freight Rates: Key Factors and Market Dynamics
A new report from AlixPartners highlights that most shipping companies on the eastbound Trans-Pacific route have maintained spot rates from January 2025, indicating eroded pricing power as the industry enters one of its historically weakest periods.
The Drewry World Container Index showed that freight rates per 40-foot container fell 10% to $2,795 in the week ending February 20, having fallen steadily since January.
Despite the recent downturn, ocean freight remains a significant revenue source for carriers. Maersk reported a 49% increase in ocean freight revenue for Q4 2024 and plans to double its ocean business capital expenditure from 1.9 billion to 2.7 billion in 2024.
Another uncertainty affecting negotiations is the situation in the Red Sea. Shipping companies have diverted trade away from the Suez Canal, increasing transit times by several weeks since late 2023. To maintain trade flow and schedule reliability, carriers have added 162 vessels to their fleets, enhancing supply chain certainty. However, a return to Red Sea routes could render these additional vessels unnecessary, potentially lowering ocean freight prices.
Market participants remain cautious about any imminent changes. Harry Sommer, CEO of Norwegian Cruise Line Holdings, expressed the complexity of achieving Middle East peace, envisioning a scenario where his ships could navigate the Red Sea by 2027.
Additionally, a significant change in the ocean carrier alliance structure this year could impact freight rates. MSC, now independent, has no alliance ties, while the anticipated “Gemini Alliance” between Germany’s Hapag-Lloyd and Maersk commenced in February. These partnerships, which help maximize service levels through shared vessels and coordinated schedules, control over 81% of the global fleet’s container capacity, according to the Alphaliner shipping database.
In summary, the ocean freight market is currently navigating a complex landscape of fluctuating rates, geopolitical tensions, and structural changes within carrier alliances, all of which are influencing the dynamics of global trade and logistics.
Post time: Mar-13-2025
