Container shipping rates likely to drop in 2025 13/11/24
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‘Container shipping rates likely to drop in 2025’, not a good sign for rail freight
Prices for maritime container shipping are likely to embark on a downward trend in 2025. Geopolitical and macroeconomic factors are behind the projected lower rates, which do not bode well for Asia – Europe rail freight traffic.
Such projections were made by Stefan Verberckmoes from Alphaliner and Christian Roeloffs, CEO of Container xChange at the Intermodal Europe event in Rotterdam. Whereas Verberckmoes modestly admitted his off predictions for 2024, both speakers concurred on where the market is heading in 2025: container shipping rates will decrease.
Such a downward trend could mean a drop in relative competitiveness of rail freight compared to its main competitor, maritime shipping, on Asia – Europe routes.
Skyrocketing profit margins
The key to container shipping rates lies in the trends of the past couple of years. The market has been extremely volatile, explained Stefan Verberckmoes. Profit margins skyrocketed during the covid pandemic, followed by a sharp decline in profitability, after which the Red Sea crisis boosted it again. Still, ships cannot transit the Suez canal, forcing them to go the long way around Africa. For that reason, shipping companies have been on a vessel purchasing “frenzy” to grow their capacity, according to Verberckmoes.
In the near future, that purchasing frenzy will likely lead to overcapacity, and shipping companies will have to vie for whatever goods they can to fill their ships. Christian Roeloffs expects overcapacity to beat demand, and so in 2025, rates will be on the decline. He also points to the fresh American president-elect Donald Trump’s intention to “drill baby drill” more oil, which could make sea shipping even more competitive.
Warning signs
A trend of cheaper and cheaper sea container shipping does not bode well for Asia – Europe rail freight. Whereas the problem of sea shipping will be to attract enough goods against the background of overcapacity, rail has the opposite problem: capacity is limited on routes such as the Middle Corridor and Northern Route.
Especially the Middle Corridor is a route with many challenges, traversing various countries and bodies of water. Administrative costs as well as transshipments makes it more complex and expensive. With overcapacity and a subsequent expected drop in container prices, it is not hard to imagine goods finding their way overseas rather than overland.
Uncertainty
Whether or not things will actually take a turn for the worse for rail freight remains to be seen. Both Roeloffs and Verberckmoes rightfully pointed out that there are many factors at play in the container shipping market: international conflicts, climate change, shortages and economic policies such as Trump’s planned protectionist tariffs are just a few of the many determinants of the market in the coming year. It is impossible to predict exactly how things will unfold.
Author: Dennis van der Laan