by Lloyd's List

18 December 2024 (Lloyd's List) - THE 2025 container shipping market outlook remains murky, with many variables at play and widely differing forecasts on vessel demand growth.

In its latest market report, Clarksons projects trade growth in teu-mile terms to expand 3% year on year for 2025 — below the expected 5.4% fleet growth — under its base case scenario assuming continued Red Sea rerouting.

The term refers to the measurement of containerised shipping demand based on both volume of containers transported and distance travelled.

In contrast, this year saw teu-mile demand surge more than 17%, boosted by the longer distances from ships skirting the Cape of Good Hope, while fleet capacity grew 10.2%. 

However, if the disruption “unwound” through 2026, teu-mile demand could plunge 4% for the full year, versus 3.2% capacity increase, according to Clarksons.

The brokerage said that although no resolution seems likely soon, a recovery in Red Sea transits would lead to “a much more challenging outcome for container shipping markets”, even if slowing vessel speeds could help offset excess capacity.

In its 2025 outlook report, Xeneta divides scenarios into no return of boxships to the Red Sea, partial return, and full return. This results in a range of anywhere from 3% growth to an 11% contraction for next year’s teu-mile demand.

“A large-scale return to the Red Sea seems inconceivable at present, but a partial return may be possible at some point in 2025,” said Xeneta senior analyst Emily Stausbøll.

This will present shippers with a choice between switching to faster trips via Suez Canal or sticking with the Cape of Good Hope service providers, creating new competition dynamics between carriers, she added.

Signs that Iran and some of its key proxies have been severely weakened in recent months, including the coup in Syria and Hezbollah-Israel ceasefire deal, have fuelled concerns the Tehran-backed Houthi militias could prematurely end their harassment of shipping in the Red Sea.

The latest media reports indicate a Hamas-Israel truce is also in final stages, with Israel’s defence minister, Israel Katz, recently saying an agreement is “closer than ever”.

The more optimistic freight market watchers say too much uncertainty remains in the Middle East, including the complex political motivations behind the Houthi attacks, to talk about a Red Sea comeback yet.

Tariffs and port strike

Another major market variable is the tariff policies of newly elected US president Donald Trump, who has threatened taxing goods from around the world, particularly China.

Clarksons noted US-China box trade represents about 5% of global volumes and 9% of teu-miles. “Policy impacts from the US election are unclear but point towards potentially increased trade ‘friction’ ahead,” it said.

This change is expected to spur further supply chain diversification, which will arguably boost teu-mile demand, at least in the short term. Longer term prospects face pressure if the trade war causes slowdowns in the US and other major consumer nations.

Xeneta chief analyst Peter Sand said: “Tariff retaliation would then be expected from China should Trump get his way. We are already seeing China diversify its exports to other nations, including some which will be used as a stop to avoid tariffs when eventually moved into the US.”

A prolonged strike at US east and Gulf coast ports, if it materialised, would also greatly alter the outlook for container capacity demand, with severe congestion and delays expected.

For now, it is still possible the US Maritime Alliance, representing ocean carriers, could cave on port automation before the next strike deadline. But if the carriers hold firm, and Trump continues to side with the dockworkers union, there could be an extended strike causing major supply chain havoc.

Linerlytica co-founder Johnson Leung said his research firm has stopped predicting teu-mile prospects “because of too many variables.”

“For example, we are not expert in geopolitical situation to call when Red Sea crisis will finish.”

According to Linerlytica’s data, the Red Sea rerouting has absorbed about 7% of global containership capacity. It expects teu demand to grow 2.6% next year versus 5% fleet growth — still indicating an oversupplied market without accounting for sailing distances.

Maersk, the world’s second largest container carrier, appears more upbeat than most analysts.

Charles van der Steene, Maersk’s regional president for North America, earlier this week told media that global trade volumes are expected to increase 5%-7% in 2025.

He said the group saw nothing in the current situation that would point to growth below this, as the Red Sea crisis and resilient American demand boosted consumption. Maersk raised its 2024 container market volume growth forecast to 6% in October.