Container Shipping Market Overview & Outlook

Disruption remains the key demand driver

September 2024
Container Shipping Market Overview & Outlook
Disruption remains the key demand driver

Supply/demand Demand Supply

Ship supply is expected to grow on According to the IMF, the world Ship deliveries will hit a new record
average 10.3% in 2024 and 6.3% in economy will grow 3.2% and 3.3% in high in 2024, beating the record set in
2025. After increasing in 2024, sailing 2024 and 2025 respectively. Of the 2023. The fleet is expected to grow
speeds are expected to reduce in world’s five largest economies, only 14.5% between end 2023 and end
2025. the EU will grow faster than in 2023. 2025.

Rerouting via the Cape of Good Hope

is expected to impact all of 2024. We Global manufacturing PMI continues
Recycling is expected to remain low
forecast that ship demand will to indicate stability as it hovers
in 2024 as the Red Sea situation
increase 15.5% in 2024 and fall 5.5% around 50. In China, PMI for new
increases demand for ships. Recycling
in 2025 if ships return to the Suez export orders has dipped below 50
could increase in 2025.
Canal. during the past 4 months.

On average, the supply/demand Retail sales in the US are down

balance will be stronger in 2024 than Congestion remains low in most
slightly while up slightly in the EU.
in 2023. Weakening during 2nd half of ports. Failure to renew longshoremen
EU consumers are reporting higher
2024 has begun and will gather speed contract for US East and Gulf Coast
confidence while US consumers’
if ships return to the Suez Canal. could cause disruptions.
confidence has slipped backwards.

Significant uncertainty remains as it The long sailing distances around the

Attacks on ships in the Red Sea have
is unknown when ships can return to Cape of Good Hope have led to a
forced 90-90% of container ships to
the Red Sea. If they cannot return slight increase in sailing speeds. We
sail around the Cape of Good Hope,
during 2025, supply/demand will be expect average sailing speed to
adding 10% to average sailing
stronger than in our base scenario. remain elevated during 2024 but fall
distances and ship demand.
in 2025.
Container Shipping Market Overview & Outlook
Disruption remains the key demand driver

Supply/demand balance balance will on average be tighter during 2024 alternative scenario we assume no changes to
than during 2023. the current rerouting pattern.

During the second half of 2024, we expect ship In both scenarios, the supply/demand balance
demand growth to weaken due to weaker would weaken compared to 2024, however it
cargo volume growth. On the other hand, would remain stronger than in 2023 in the
supply will increase as the fleet continues to alternative scenario.
grow and so the supply/demand balance during
the fourth quarter could approach the levels
seen during 2023.

However, ship demand could end higher than

projected during late 2024 and early 2025 due
to disruptions caused by the redeployment of
carrier alliances’ services, particularly if
negotiations between the International
Longshoremen’s Association (ILA) and the
The disruption caused by ships being rerouted United States Maritime Alliance (USMX) are
via the Cape of Good Hope remains the key unsuccessful and lead to dockworker strikes in
ship demand driver. As a result, ship demand is all US East and Gulf Coast ports starting on 1
forecast to grow three times faster than cargo October.
volumes in 2024. Without it, ship supply would
For 2025, we present two scenarios. In our
have grown faster than ship demand but
base scenario we assume that ships could At present, we cannot judge which scenario is
instead we expect that the supply/demand
return safely to Red Sea and Suez Canal the more likely but as the Israel/Gaza conflict
routings throughout 2025, whereas in our has expanded to include Hezbollah in Lebanon,
Container Shipping Market Overview & Outlook
Disruption remains the key demand driver

it does appear increasingly likely that rerouting only 15% since then. Despite time charter rates crude tankers remains low relative to the size
may partly impact 2025. and the CCFI normally being very closely of the fleets. Unless renewed interest in adding
correlated, time charter rates have yet to react orders for these ship types underpins further
Spot freight rates from Shanghai (SCFI) peaked significantly to freight rate decreases because expansion of the global order book, we expect
in early July but have since declined more than ship availability remains low and most continue prices to begin to fall along with the size of the
30% due to lower cargo volumes and an to be renewed or find new time charter order book.
increase in capacity deployed in some trade contracts.
lanes.
As we move into the fourth quarter and into
2025, we expect further freight rate
reductions and beginning time charter rate
weaknesses, particularly if ships can return to
normal routings.

The stable time charter rates have supported

equally stable prices for second-hand ships
and their development should remain aligned
when the forecasted weaker supply/demand
balance begins to impact time charter rates
negatively.

On the strength of renewed container

contracting, the global order book has Recycling prices are being pressured by cheap
increased another 5% during the last three Chinese steel exports, and unless a pick-up in
Average export freight rates from China (CCFI) months, leading to further price increases for Chinese steel demand reduces those exports,
peaked slightly later in July and have decreased newbuilds. The order book for bulk carriers and we expect low prices to continue.
Container Shipping Market Overview & Outlook
Disruption remains the key demand driver

Much uncertainty remains in our forecast, not Macro environment However, we also offer an indication of the
least because much of the demand side impact should ships continue to avoid the Red
development is directly dependent on the Houthi attacks on ships in the Red Sea continue Sea.
current and potential future disruptions. to severely impact trade lanes that normally
transit the Red Sea and the Suez Canal. Transits
Risks to economic growth naturally also remain of the Suez Canal remain 90-95% lower than at
but at least appear less of a concern because the same time last year.
lower inflation has allowed both the Federal
Reserve and the European Central Bank to
begin interest rate reductions.

The result of the presidential election in

November will meantime dictate US economic
and trade policy from 2025 onwards. Should
Donald Trump win a new term, his plans to
impose new high import tariffs could disrupt US
imports while increasing cost of living for
consumers.

Further disruption could occur if ILA and USMX

fail to agree on a new contract before the
current one expires on 30 September. If no
agreement is reached, work stoppages could
Though no resolution is in sight, we have in our occur in all US East and Gulf Coast ports
base scenario chosen to assume that ships may starting on 1 October. Though President Biden
utilise normal routings throughout 2025. has the authority to intervene in labour
Container Shipping Market Overview & Outlook
Disruption remains the key demand driver

conflicts that threaten national security, he has that the world economy will grow by 3.2% in Growth in the Chinese economy is expected to
never done so, nor does he currently plan to do 2024 and 3.3% in 2025. slow further in 2025 as the population ages
so to solve the potential dockworker strike. and productivity growth slows, and thereby
contribute to lower growth in the East &
More than half of all US container imports and Southeast Asia region. Excluding the COVID
export moves through US East and Gulf Coast years, 2025 is predicted to be the first year in a
ports and even short-term work stoppages very long time that the region will contribute
could cause severe delays to ships and less than 40% of global growth.
containers. Maersk has estimated that a one-
week shutdown could take between four and In the Europe & Mediterranean region, growth
six weeks to recover from. in 2025 is forecast to finally show some
upward momentum. Germany is normally a
Disruption could even occur in US West Coast key driver of growth in the region but has
ports if more ships and cargo are diverted to experienced very weak growth during both
those ports during a shutdown. Congestion 2023 and 2024, not least due to challenges in
could build up and cause delays to ships and the manufacturing sector. Along with other
cargo moving through the West Coast. major EU economies, improvements are
expected in 2025.
Should a potential conflict be resolved quickly, The growth forecast for 2024 is only
the impact on the US economy will likely be marginally lower than the 3.3% growth In the US, 2025 is forecast to show weaker
minimal though a longer conflict could possibly achieved in 2023, and regional growth growth as the labour market is expected to
lead to an increase in unemployment and cool and consumption moderate which will
forecasts are also in line with 2023. Despite
inflation. only a small uptick in the global growth drive growth in the North America region
forecast, 2025 is meantime forecast to reveal lower. A so-called “soft landing” is still forecast,
In its World Economic Outlook Update from
larger shifts in regional growth patterns. and the recent interest rate reduction should
July, the International Monetary Fund forecasts
contribute to this.
Container Shipping Market Overview & Outlook
Disruption remains the key demand driver

Other regions are expected to see faster It is meanwhile worth mentioning that the CLI In the eurozone, however, manufacturing PMI
economic growth in 2025 than in 2024 and for both the UK and Brazil is currently above is significantly below 50 indicating continuing
combined they are forecast to contribute one 102 and thus indicates the largest increase in contraction in the sector. The PMI has
third of global economic growth in 2025. future growth of the countries measured. remained below 50 since mid-2022.

The OECD’s Composite Leading Indicator (CLI) Despite weakness in the eurozone, global In China, slight weakness has recently been
also points to relative growth stability in most manufacturing activity appears stable as the indicated as the manufacturing PMI from NBS
regions. For nearly all countries and regions global Purchasing Managers’ Index (PMI) (measuring large-scale state-owned companies)
measured, the indicator hovers around 100. remains within a very narrow band around 50. as well as the PMI for new export orders has
dipped below 50 during the past four months.
Container Shipping Market Overview & Outlook
Disruption remains the key demand driver

EU consumer confidence has, however, the retail sector in the US has suffered a small Demand
continued to improve, although it remains decline in sales volumes.
significantly below pre-COVID levels. In the US, We forecast that cargo volumes will grow 4-5%
an increase in consumer confidence in early in 2024 and 3-4% in 2025. Volumes in head-
2024 has since been reversed. haul trades are expected to grow slightly faster
than the average.

The shift in consumer confidence has had a

direct impact on retail sales volumes in both We have lowered our cargo volume growth
regions. Whereas the EU has seen a slight forecast for 2024 by 1 percentage point as
increase in year-to-date retail sales volumes, second quarter volumes for some back-haul
trades disappointed compared to our forecast,
Container Shipping Market Overview & Outlook
Disruption remains the key demand driver

and because recent freight rate reductions East & Southeast Asia is forecast to contribute 2024-2025. Regions in the northern
indicate a faster weakening of head-haul trades 28% of import volume growth during 2024- hemisphere are forecast to see lower average
than we had previously forecast. 2025, and North America 25%. annual volume growth of 3-4% but should still
drive nearly 80% of volume growth as they
On the other hand, we have raised our ship import 6-7 times more cargo than the regions
demand growth forecast for 2024 by 0.5 in the southern hemisphere.
percentage points to 15-16%. Trade lanes
impacted by the rerouting away from the Red During the first half of 2024, cargo volumes into
Sea and Suez Canal have been stronger than North America from East & Southeast Asia have
previously expected, increasing sailing grown particularly fast (14.7% y/y), partly due
distances and lifting ship demand growth. to a relatively weak first half of 2023 and partly
because of peak season cargoes being shipped
For 2025, we have included a forecast for both earlier than normal. The looming strikes in East
our base scenario and an alternative scenario. and Gulf Coast ports along with longer transit
Our base scenario assumes that ships may times in some trade lanes have encouraged
return to normal Red Sea and Suez Canal shippers to ship early.
routings throughout 2025, whereas our
alternative scenario assumes no change However, it appears that second half volumes
compared to 2024. will suffer. Highlighting the unusual
However, it is the South & Central America development, spot freight rates from Shanghai
Should ships be able to return to normal to the US have dropped by more than 30%
region that is forecast to post the fastest
routings, we forecast a 5-6% reduction in ship between early July and mid-September. In the
growth rate. In fact, despite expected
demand in 2025 whereas we forecast that ship 2010s, before COVID, the spot freight rate fell a
disappointing growth into Sub-Saharan Africa
demand should grow 3.5-4.5% if ships maximum of 10% during the same period but
during 2024, regions in the southern
continue to be rerouted via the Cape of Good regularly saw a slight increase in rates.
hemisphere are forecast to post average
Hope.
annual volume growth of 5.5-6.5% during
Container Shipping Market Overview & Outlook
Disruption remains the key demand driver

Except for Durban, South Korea, West Japan Similarly, if ILA and USMX cannot agree terms Supply
and Oceania, spot freight rates from Shanghai before 1 October, extensive port strikes in
to all other destinations have similarly ports on the US East and Gulf Coast could
developed much worse than was generally the temporarily lift ship demand.
case during the 2010s. In fact, the overall
Shanghai Containerized Freight Index has also
fallen more than 30% whereas it would
normally fall a maximum of 5-10%.

An increase in the capacity deployed may partly

explain the adverse development in some trade
lanes but we expect that this is mainly being
caused by weaker volumes. Combined with a
relatively stronger second half of 2023, we
therefore forecast a lower annual growth rate
during the second half of 2024 than during the
first half.
We forecast that the average monthly fleet
Ship demand growth may end higher than
will grow 10.1% in 2024 and another 6.7% in
average during late 2024 and early 2025. MSC
2025. Due to the longer sailing distances
and members of Gemini Alliance and the
around the Cape of Good Hope, average sailing
Premier Alliance may temporarily require
speeds have increased during 2024, and ship
additional ships to transition from the service
supply is therefore growing faster than the
patterns offered together with their current
fleet.
partner(s) to those planned with their new
partner(s).
Container Shipping Market Overview & Outlook
Disruption remains the key demand driver

In 2025, our base scenario assumes a return to This year is expected to see deliveries hit a Ships in the 12-17k TEU size segment have
normal Red Sea routings, and we therefore new record high of 2.8m TEU whereas they continued to dominate new contracting during
assume that sailing speeds will reduce back to should begin to slow down as early as 2025. 2024, and they also make up nearly 50% of the
2023 levels and cause ship supply to grow capacity in the order book. Therefore, they are
slower than the fleet. The increased demand for ships due to longer forecast to drive nearly 60% of the fleet growth
sailing distances has meant that ship recycling between the end of 2023 and end 2025.
By the end of 2024, the fleet is expected to has remained very low. In both our scenarios
have grown to 30.6m TEU, an increase of 9.3% for 2025, we expect that the supply/demand
compared to the end of 2023. Another 4.8% balance will weaken, and we therefore forecast
growth is forecast to be added by the end of that recycling activity will rebound.
2025 and the fleet will then hit 32.0m TEU.

Sailing speed has remained higher, as

conditions in the Red Sea have stayed
unchanged. The increased average speed is
Container Shipping Market Overview & Outlook
Disruption remains the key demand driver

driven by ships larger than 6,000 TEU which to achieve 90% schedule reliability, which may
now regularly sail faster than 15 knots on cause them to slow ships down and increase
average, whereas their average speed had buffers available to make up for delays.
dipped below 15 knots during 2023.

As mentioned, if the crisis is resolved we

expect average speed to slow back down to
14.4 knots in 2025. Average speed could go
even lower in 2025 as the Gemini Alliance aims
Container Shipping Market Overview & Outlook
Disruption remains the key demand driver

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