Container volumes growth to slow slightly in 2025: Xeneta

Global demand for container shipping in the first eight months of 2024 was up 6.7 percent year-on-year with May and August both surpassing the 16 million TEU mark, which had never happened before, according to the Xeneta Ocean Outlook 2025.

"Xeneta expects total demand growth for 2024 to land at 4-5 percent and break through 180 million TEU, surpassing the all-time high of 179.8 million TEU from 2021," says the update.

2024 has been a year characterised by shippers’ extensive frontloading of cargo to safeguard supply chains and ensure enough goods were on inventory should even worse disruptions be on the way, the update added.

"A trade-to-GDP multiplier at 1.6 is the highest since 2011, representing a clear trend-break from the 2012-2023 average of 0.8. This reinforces the suggestion that frontloading of imports was to protect supply chains rather than due to underlying consumer demand. This would suggest lower imports in 2025 as shippers draw down on inventories. For 2025, Xeneta forecasts a three percent TEU demand growth on a global level."

Peter Sand, Chief Analyst, Xeneta says: “Macro-economic developments set the overall direction for container shipping demand but it does not tell the whole story and shippers need to understand market nuances at a regional and port-to-port level. The upcoming U.S. Presidential elections will have a major influence on 2025 because the potential for new tariffs on Chinese imports could see shippers revisit their manufacturing and supply chain setups – and perhaps see a further acceleration in imports to Mexico.

“2024 was very much driven by frontloading of cargoes, in addition to longer sailing distances. Any change in this approach next year represents a downward risk to demand – unless 2025 turns out to be even more dramatic.”

2025 outlook
Positive cues

*Faster decline in U.S. inflation

*Recovering German economy; and

*Disruption such as natural disasters and geopolitical events

Negative cues

*Retailers normalising inventories after 2024 frontloading of cargoes

*Geopolitical deterioration/imposing of new sanctions

*Consumers being fearful of the future, including rising unemployment in the U.S.; and

*Interest rates not cut fast enough in U.S. and Euro area

Backdoor to U.S. will remain open in 2025
China to Mexico trade has been in the spotlight in 2024 with TEU-demand growth increasing 22.1 percent year-to-date compared with 2023, the update added. "This follows full year-on-year growth of 34.6 percent in 2023. One of the key reasons is found in the cooling relations between China and the U.S., and Mexico being seen as a backdoor to avoid import tariffs.

"Looking ahead to 2025, demand is expected to increase further on this trade. Another one to watch is China to the Middle East where volumes are 52 percent up from 2021."

2024 review
Xeneta's global average spot rate has softened since peaking in July as the long-term market begins to rise, the update added. "The narrowing of the long-short market will be of great significance ahead of negotiations for new long term contracts in 2025.

Shippers will be hoping the markets narrow further while carriers are doing their utmost to keep the spot market elevated.

"TEU-mile demand shot up in 2024 as ships diverted around the Cape of Good Hope and was the reason many ships that would otherwise have contributed to overcapacity in the market in 2024 had work to do. In 2025, TEU-mile demand will continue to be a key factor in understanding the dynamics behind shifting freight rates."

Emily Stausbøll, Senior Shipping Analyst, Xeneta says: "A large-scale return to the Red Sea seems inconceivable at present but a partial return may be possible at some point in 2025. This will throw up an intriguing market dynamic with shippers facing the choice of utilising trades with shorter transit times via the Suez Canal or sticking with carriers who continue to divert around the Cape of Good Hope. There will be much to consider, not least for the carriers who may begin to lose market share to competitors who have returned to the Red Sea.”

Carriers, alliances driving fleet growth
MSC is the single carrier expecting the most new tonnage, with 582,000 TEU scheduled for delivery in 2025 in the form of 46 new ships, the update added. "The vast majority are owned by MSC with nine owned by non-operating owners (NOOs) and chartered to MSC. These deliveries will extend MSC’s status as the globe’s largest carrier, with the new deliveries adding to its current market share of 20 percent, affording it the scale to attempt a non-alliance approach from 2025."

OCEAN Alliance - the only unchanged alliance - will see the most capacity delivered in 2025. The three carriers that make up the alliance (COSCO Group, CMA CGM and Evergreen) have 591,000 TEU scheduled for delivery next year.

"The new Premier Alliance - already the smallest alliance after losing Hapag-Lloyd - will see the lowest deliveries of new ships at 230,000 TEU."

Stausbøll says: "Carriers have taken very different approaches to fleet in 2025. So, there will inevitably be some winners and some losers depending on how the market develops. This situation creates an opportunity for shippers as long as they understand how to use the varying carrier and alliance strategies to their advantage. While the market remains tight, carriers with the largest tonnage will have the upper hand but any easing in capacity – especially through a large-scale return of ships to the Red Sea - would transform the situation dramatically and put pressure back onto carriers to maintain market share through aggressive pricing.”

As of February 1, 2025, there will be three main alliances operating on the world’s six major fronthaul trades found on Transatlantic, Transpacific, Asia-Middle East and Asia-Europe routes:

*Gemini Cooperation – the newest alliance in the market comprising Maersk and Hapag-Lloyd.

*OCEAN Alliance - the alliance with the largest group of carriers, consisting of COSCO Group, CMA CGM and Evergreen. Launched in 2017, it has now been confirmed to run until 2032; and

*Premier Alliance - rebranded from THE Alliance, the partnership consists of ONE, HMM and Yang Ming.

Sand says: "Shippers must understand what the new alliances are offering on the trades they utilise, and it comes down to far more than price. It is a balance between cost, reliability and transit time while also being aware the carrier you currently use may not be the best one going forward. Keep your options open, do not be afraid to challenge carriers and seek assurances they can deliver what they are promising, particularly around service reliability.”

Preparing for the unknown
Other potential flashpoints threaten supply chains in 2025, whether it is regime change in Bangladesh, military action in the Taiwan Strait or even another global pandemic or climate-related incident, the update added.

"Many shippers have now moved away from just-in-time to just-in-case in their supply chains during 2024, frontloading imports earlier in the year following outbreak of conflict in the Red Sea and threat of strikes on the U.S. Atlantic coasts."

Shippers should move away from freight procurement strategies that focus purely on cost to one which balances getting the lowest possible rate with a higher service level, the update added.