Freight Market Update: March 10, 2025

AIR FREIGHT

A Slower Than Expected Start To 2025 As Air Cargo Faces A ‘Waiting Game’ Amidst Fears Of Tariff Trade War

• In January 2025, global air cargo demand grew by just 2% yoy, a significant drop from the double-digit increases seen in 2024. This decline was attributed to the earlier LNY affecting volumes from China.

• According to Xeneta’s analysis, despite concerns over new U.S. tariffs, January's lower demand also followed an unusually high January 2024. The air cargo market is facing uncertainty, particularly regarding trade negotiations, which complicates planning for shippers.

• E-commerce remains a vital driver of air cargo growth, with cross-border shipments from China to the U.S. accounting for 25% of total global sales. However, the potential suspension of the de minimis exemption could disrupt air freight capacity, leading to increased costs and delays. Last year, e-commerce volumes from China grew by 20-30%.

• In terms of market performance, global air cargo chargeable weight grew 2% in January, with capacity also increasing by 2%, while the spot rates remained 17% higher than the previous year, driven by e-commerce demand and limited air cargo capacity.

Global air cargo demand, supply, load factor and freight rate developments

Source: PayloadAsia

_________________________________________

OCEAN FREIGHT​

Post-Red Sea: Major demand drop in Asia-Europe

• The Red Sea crisis has resulted in Asia-Europe supply chain transit times increasing by 7-14 days, which has effectively led shippers to raise their inventories by a corresponding amount. In 2024, demand on Asia-Europe routes grew by 8.5%; however, when accounting for the extended transit times, the actual growth adjusts to a range of 4.5%-6.5%. This reduction means that the Asia-Europe trade experienced a demand growth boost purely due to the longer transit times. Averaging the supply chain lengthening to 10 days yields a demand growth boost of approximately 2.9 percentage points.

• If vessels revert to the Suez routing, the supply chain will contract leading to a release of excess inventory. This is expected to temporarily impact importers to curb orders to mitigate the surplus. Consequently, after the Suez Canal reopens, a negative impact of -2.9 percentage points on Asia-Europe demand growth is anticipated.

• However, ocean carriers are cautious about returning to the Red Sea, requiring a permanent ceasefire between Israel and Hamas before resuming services. Meanwhile, the insurance costs for transits have skyrocketed from about 0.05% of a ship's value to approximately 1%, significantly increasing the cost for carriers.

• The ongoing geopolitical instability has led to a wait-and-see approach from shipping companies, affecting their willingness to navigate the region. Meanwhile, European naval operations will continue to monitor shipping safety in the Red Sea and surrounding areas, extending their presence until Feb. 28 2026.

Asia to North Europe short- and long-term rates converging

(short-term contracts of 32 days or less, long-term contracts of 88 days or more, and long-term contracts signed in the last three months)

Uncertainty over the resumption of Red Sea transits is prompting Asia-North Europe carriers to offer discounts of up to 22%. Despite concerns, carriers believe they can manage overcapacity through increased scrapping and slower vessel speeds.

Source: SeaIntelligence, JOC, JOC-2, ShippingWatch

Xeneta: Global Congestion is building

• In February, the spot market saw significant weakening across global trades, with rates on major routes despite carriers' efforts to maintain rates amid tender negotiations. Year-on-year comparisons show a decrease from previously high rates, but current levels are still double those compared to December 2023.

• Meanwhile, congestion is rising globally, with over 10 million TEU currently tied up in ports, marking a significant milestone. This congestion represents 32% of the fleet, the highest level since December 2023. Contributing factors include storms, strikes, and record imports, particularly affecting North Europe. The capacity of ships inbound has increased by 16.8% compared to December 2024, reaching a seven-day moving average of 1.1 million TEU, the highest since October 2022.

• In China, congestion reached its highest level since March 2020 in January, with 2.7 million TEU tied up, although this has since decreased to 2.2 million TEU by mid-February. The U.S. East Coast is also experiencing high congestion levels, reaching its peak since November 2022, even without strikes in January.

• Despite tight capacity and an unchanged idle fleet, rates continue to fall as the market adjusts. Xeneta's outlook predicts long-term rates from the Far East to Europe, the U.S., and South America could drop by 7% to 30% by June 2025. Carriers are offering substantial discounts for longer contracts, reflecting expected market declines. Some shippers are exploring indexing for tendering to adapt to market volatility.

Global congestion in container shipping

(Million TEU (LH-axis), % share (RH-axis)

Source: Xeneta