Wittbecker: Challenges ahead for container freight in 2025

The big picture variables impacting 2025 container rates

As we head to 2025, volatility will remain high, characterizing by a host of major swing factors.

1. The shipping lanes in the Red Sea and Suez Canal region remain subject to threat from the Yemeni Houthi rebels in the Horn of Africa. This has led major containers to continue to restrict movements in the region and apply very stiff “war risk” surcharges for routes that are operating there. Vessels not using the Suez are being diverted around the Cape of Good Hope with 14 days longer transit times to EU and US destinations.

Another approach has been the rise in so-called blank sailings, where carriers elect to skip ports of call in the region on published routes or even cancel entire routes to manage capacity or avoid problems with the rebels.

Globally, blank sailings were very high in 2024, amounting to 15%-20%. A lack of vessel capacity was blamed for much of this, and this could continue in 2025.

The Suez Canal normally handles about 12% of global trade each year. However, freight was down 70% in Q3’24 and is expected to fall 4.5%-5.5% year on year in 2025.

2. The US International Longshoremen Association (ILA) will begin negotiations again after averting a strike in October. The ILA had made some aggressive demands following the contract expiration, which was extended to Jan. 15. No reason to believe they will come back to the table having reduced those demands, especially after seeing the contract settlements that organized labor achieved at General Motors and Boeing. This could mean another walk-out in January.

3. Chinese New Year begins Jan. 29. This normally sees a mass migration of Chinese workers to and from their hometowns, as well as the wholesale closures of offices, factories, and ports for two weeks or more.

4. On Feb. 1, the Gemini and Premier container alliances go into effect. Gemini brings Maersk and Hapag-Lloyd under one umbrella. Premier joins Ocean Network and Yang Ming Marine together. The Maersk and Hapag-Lloyd alliance joins the second and fifth largest containers in a pool, controlling about 6.2 million TEU (twenty-foot equivalent units) of capacity. This makes them larger than the largest individual container line, MSC, which controls 5.7 million TEU of capacity.

The Ocean Network-Yang Ming alliance combines about 2.5 million TEU, which would place as the third largest bloc of capacity behind CMA CGM and COSCO, which together operate the Ocean Alliance of about 4 million TEU.

It is reasonable to expect that these companies will use their respective alliances to boost rates and carefully manage capacity to optimize revenue.

Gemini is expected to introduce a flow path, using a hub-and-spoke approach to moving cargo, as opposed to direct port pairings. This could increase transit times for shippers employing Gemini.

5. The market waits anxiously to see if the Trump Administration will follow through on a host of tariff threats against China, Canada, Mexico, the BRICs and others who might clash with his view of what is fair in trade.

Clearly, increased tariffs on China could impair inbound trade flows and reduce outbound TEU capacity.

It remains to be seen if other countries are subjected to similar threats.

6. Leading experts believe that capacity will rise 8% in 2025, while container demand will rise only 3%. This should temper the extreme volatility of 2024, but the caveat is that new alliances will carefully manage capacity to optimize revenue during those peak demand periods such as in Q3 when the annual surge in Christmas goods shipments occur to North America and the EU.

What does this mean to shippers of aluminum?

Looking at the big picture variables, these are the takeaways for the importers of primary products into the US and the exporters of scrap.

1. The Houthi rebel threat is not going away. Longer transits around the Cape of Good Hope will be the rule and for those shippers able to find capacity through the Suez, they will pay dearly for the shorter transit times. That will have to be recouped through higher Midwest premiums, as product premiums will be fixed on annual contracts and unable to pass through any surcharges. If the Midwest does not perform, then expect to see reduced imports from the Middle East.

Imports of primary metal from India continue to suffer from geography…. just a LONG way to get to the US and expect those rates to remain high.

2. The ILA threat of a renewed strike will put off prospective buyers of imported primary, coupled with the uncertainty of new Trump tariffs. Importers who can persuade buyers to contract will need to have substantial depot stocks away from the ports to guarantee that an ILA strike will not strangle the buyers from getting their billet, foundry or ingot.

3. The Chinese New Year hiatus will be planned for, and that alone should not impact rates. A bigger concern will the decline in Chinese exports facing stiff new import duties from Trump. This would reduce the availability of TEU for reloading back to China — meaning scrap exporters may find it harder to secure capacity.