Expert Column 2025 Container Market Trend and Outlook

1. 2024 Container Market The 2024 container market recorded higher than expected rates due to several issues. The accumulated average of SCFI in November 2024 soared more than 150% YoY to the range of 2,500.

The first reason for the rate hike is that the U.S. tariffs imposed on China caused an early shipment, leading to skyrocketed demand for container transportation. The global container volume increased by 5.1% YoY, an estimated 210 million TEU. As of September, routes for Asia-North America were up by 15.2% and Asia-Europe by 6.8% YoY ^[1].

Second, as the Red Sea crisis made the movement around the Suez canal difficult, vessels opted to divert via the Cape of Good Hope increased, decreasing the actual supply in the market. As of October 2024, fleets deployed on Asia-Europe routes soared to 7.4 million TEUs, up by more than 27%, reducing increases of fleets in other deep sea routes ^[1].

Other than those reasons, vessels with lower CII (Carbon Intensity Indicator) levels slowed down the speed to drop the usage of fuel due to IMO’s decarbonization regulations. It is also anticipated to partly impact the supply. According to the data by Clarkson, among vessels smaller than 3,000 TEU, when comparing the speed of the vessels with CII levels of A-C and D-E, those with lower levels reduced the speed about 5%^[3].

2. 2025 Container Market Demand Outlook The 2025 container market is projected to undergo changes from the current market. The demand for containers would be around 2%, lower than the world GDP of 3.2%^[5]. When looking at the elasticity trend between the world GDP and container volumes, the elasticity modulus is shown to decrease, indicating that the 2025 container growth would lag behind the world GDP.

In other words, during the 2002-2005 period, the world GDP rose by 1% while the container volume increased by 2.45%. But the figure has gone down to record 0.3%, below the world GDP in the 2020-2023 period. The biggest powerhouses, the U.S. and China, which affect the world’s GDP the most, could have similar or lower GDP than in 2024.

As inflation, which peaked in 2023, has shown a sign of easing, central banks started to reduce interest rates since the second half of 2024. It will positively affect the demand for containers but the demand would vary by country/continent. North America saw the biggest increase in container volume due to the base effect, therefore it would be hard to expect a big jump next year. However, the possibility of change in volume arisen by the Trump administration should not be excluded.

Europe would also forecast an increase in container volume, but the growth would be limited since positive triggers are constrained except for an increase in disposable incomes, along with the interest rates cut. The Intra-Asia region is affected by the trade war but the ton-mile could be elevated thanks to the transfer of demand to South East Asia, India, etc. Additionally, the largest volume increase would be seen around China as the De-Sinicization of manufacturing facilities appears to be a mid-to-long-term trend. 3. 2025 Container Market Supply Outlook New deliveries of fleet would add 2.1 million TEUs in 2025, up by 6-7% of the total container fleet, reaching to 308.8 million TEUs. The new injection in 2025 is smaller than 3.13 million TEUs in 2024 but still the number is high compared to the pre-pandemic period when the new deliveries were only around 1 million TEUs [1]. Also, the supply surpasses the demand of 2%, worsening the concerns over oversupply.

90% of new deliveries in 2025 are focused on mid-to-large vessels over 5,000 TEU and vessels smaller than 3,000 TEU are only 68. Thus, the oversupply of deep sea routes is particularly worrisome. Especially, a total of 1 million TEUs came from ultra large vessels―nine vessels of 18,000 TEU (approx. 210,000 TEUs) and 55 vessels between 15,000 to 18,000 TEU (approx. 880,000 TEUs)―will be added on East-West routes^[1]. New orders for mid-to-large vessels under 3,000 TEU are relatively less, so their major intra routes might not have strong concerns for oversupply, but still there could be a possibility that vessels over 3,000 TEU could be deployed intra routes as well.

Scrapped ships (ship recycling) of the container market in 2025 will be affected by rates but it is expected to reach 200,000-300,000 TEUs, which is largely up from 90,000 TEUs in 2024, due to stronger decarbonization regulations^[1]. Demand for scrapped ships would be difficult to be forced as penalties for ships depending on the CII levels are yet to be decided, however, the volume of entire scrapped vessels from 2021 to 2024 is only 250,000 TEUs, less than half of 660,000 TEUs in 2016, keeping the transportation costs high as vessels get aged. 4. 2025 Container Market Outlook Container rates in 2025 could move downward compared to today as supply (deliveries) is anticipated to exceed the demand. But the supply could be adjusted if ships reduce speed by complying with environmental regulations or the volume of scrapped vessels increases. Conversely, if the Red Sea crisis normalizes, supply for the deep sea would significantly rise, negatively impacting rates.

Newly injected fleets this year on Asia-Europe routes among large deep sea routes was 1.5 million TEUs, offsetting the increases in other deep sea services like Asia-North America and Asia-Atlantic routes. But if the Middle East stabilizes, the oversupply could be deepened while reassigning ships. As for vessels for Asia-Europe trade lanes, currently operating services have remained the same or reduced compared to the previous year. But the number of ships newly deployed to those lanes rose from 240 to 305.

The shock brought about by the oversupply could last long due to durable years of ships. Therefore, quite a long time would be required to mediate downward pressure on freight rates. Container carriers are projected to achieve the economy of scale with massive new orders and respond to decarbonization regulations based on accumulated assets. Thus, concerns over the oversupply and following rate competition would prolong in 2025. However, the alliances actively implemented collective actions to defend against plummeting rates during COVID-19 and the awareness of shippers regarding the stability of the global supply chain service changed, therefore it is less likely that the container rates drop below break-even points.

A few issues could be observed in the container market next year.

First, the existing 2M, Ocean, and The Alliance will transform into Ocean, Gemini, Premier, and the MSC system. In particular, the Gemini will try to improve its reliability while strengthening its Hub & Spoke system. Alliances generally call around 120 ports, on the other hand, the Gemini will not only decrease calling ports to 85 but also concentrate on terminals they own or operate to enhance reliability.

In fact, when looking into the ports being called by East-West routes services and Gemini with SNA (Social Network Analysis), the density is drastically reduced. The Gemini will adopt it for the first time and other alliances (Ocean, Premier, MSC) will stick to what they have done so far. Therefore, shippers need to pay keen attention to how Gemini’s differentiated strategies influence them.

Second, it is highly likely that the demand could change remarkably with the potential tariff war posed by the inauguration of Trump. Particularly, as tariffs on Chinese products are pre-noticed, early shipment could increase. Except for China, tariffs on Canadian and Mexican products are also notified, which could potentially impact the supply chain structure such as near/friend-shoring. Moreover, if Trump’s tariffs were to be realized, concerns over inflation and the world economy will grow strong.

Other than the issues listed above, the ILA (International Longshoremen's Association)’s strike in the U.S. in January 2025 could be a possible issue in the short term. The ILA and USMX(United States Maritime Alliance) have tentatively agreed upon the wage negotiation, but still, they are arguing over the adoption of automation in terminals. Carriers are already adjusting their services in preparation for port strikes next year but if the ILA is actually on a strike, it could have a huge impact on the container market. Besides, the EU ETS, stringent CII, Panama/Suez passages, and other various issues lie ahead, expanding the volatility of the market. # Reference [1] Alphaliner(2024) Monthly Monitor November 2024
[2] Drewry(2024), Container forecaster
[3] Clarkson(2024), https://sin.clarksons.net/
[4] KMI(2024), Container Market Trends and Outlook, World Shipping Outlook Seminar Presentation Materials
[5] IMF(2024), World Economic Outlook, Oct

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