Shippers’ quest for calm seas for ocean freight amid global trade turbulence

Uncertainty is arguably at an all-time high in ocean shipping with market visibility nigh on impossible. Questions abound but answers are in extremely short supply.

There is the impact of US trade tariffs on China, Europe, Canada and Mexico which is triggering retaliatory measures and the prospective fall-out from President Trump’s plans to tax ships built in China entering American ports. Then there is the precarious ceasefire in Gaza which has nevertheless raised hopes that the Red Sea could soon be safe for maritime traffic again, enabling transit via the Suez Canal to resume. Adding to the unpredictability is the reshuffling of carrier alliances.

A recent webinar hosted by Container xChange, entitled, From Tariffs to Trust: How Verified Container Networks Matter Now, put the accent on how firms can stay agile, mitigate risks and navigate the evolving container shipping landscape in 2025.

‘Uncertainty Toxic to Rates’

Among the panel of experts present was Peter Sand, chief analyst at Xeneta, the ocean and air freight rate benchmarking and market intelligence platform, whose portfolio of shipper customers includes some of the world’s leading multi-nationals. Addressing the webinar, he said that cargo owners had been left “overwhelmed” by the prevailing uncertainty.

“What they would like more than anything is a stable business environment, one where they can thrive, where they can build their business, instead of having to navigate a path through the obstacles to trade,” he said. “I think the best advice to give is to keep your cool and maintain your options because you cannot get a straight answer to a single question currently. We see this left, right, and center. Tariffs on goods from Canada and Mexico were raised, only to be suspended and then raised again. How does that leave a business dependent on global trade?

“Obviously, one thing with tariffs and any sort of obstacles to trade, is that it makes imports and exports more expensive. Sometimes it shows up in freight rates, sometimes it doesn't. More than anything, uncertainty is toxic to rates. No two trades lanes are alike, and it may be that those that are directly impacted will see rates go up but even those indirectly affected could experience severe knock-on effects too.”

Underlying Market Dynamics

However, he said that despite the confusing and shifting landscape facing shippers, they could at least find a solid reference point in the latest analysis into the fundamental developments of the market which showed that supply/capacity is on the rise and demand in decline.

On trade lanes into the US East Coast and West Coast from China and the Far East in general, rates have declined over the past four months but are still significantly above those seen pre-Red Sea disruption.

“But we're seeing a clear trend that shippers and forwarders are signing with carriers at a lower [rate] level, at least from the peak that we saw by the end of the third quarter last year.”

Sourcing Alternatives

Focusing on the lasting repercussions from previous trade wars, Sand recalled 2018, 2019 which pitched the US against China and led to Vietnam emerging as an alternative source for exporters and global businesses. However, this time round it could be broadened to encompass the whole of the Southeast Asia region.

“So, as an example, do shippers lock themselves into a contract with a carrier out of India for five years because they think India is the single best solution? Well, I would sound a word of caution as we seem to be in a game where the rules change way too often. In such a toxic business environment, best to keep your options open. Analyze everything you can, including the changes that we’ve seen recently in container shipping alliances – an allusion to Hapag-Lloyd and Maersk’s new long-term operational collaboration, Gemini Cooperation – as this could pose the question: ‘Who is my preferred logistics service provider?’

However, he qualified his comments on alternative sourcing by pointing out that even though there has been talk about China +1 and China + X for a number of years, it is not only extremely difficult to cut ties with the world’s leading export economy, but it does not make good business sense either.

“It’s not in the interest of anyone to 100% untangle from China. Let's face it, the infrastructure set up in China is second to none.”

‘Not a Good day for Globalization'

Commenting on the Trump administration’s plans to impose a $1.5 million fee per U.S. port entry by Chinese-built vessels and those on order from shipyards in China, Sand observed: “I can tell you that it will hit across the board. Every one of the top six ocean carriers in the world, has at least 20% of their operating active fleet built in China. And if you go into the order book, at least 40% of the vessels will be built in China. So it's not a good day for globalization nor for free trade and fair competition.”

Red Sea Situation Remains ‘a Wildcard’

Turning to the shaky ceasefire in Gaza which has raised hopes of an end to the disruption to shipping in the Red Sea making transit through the Suez Canal possible once again, Sand said that although the risk to vessels has perhaps been lowered, a full return to normal was still some way off.

“We're monitoring the number of ships transiting through the Red Sea daily from the southern end of Bab el-Mandeb, as well as from the northern end of the Canal and we do not see a particular uptick presently. They (the carriers) need absolute certainty before changing their global networks once again.”

He underlined that of the geopolitical factors impacting ocean shipping today, including US-led tariffs, the disruption in the Red Sea and the continued rerouting of ships was the predominant one in keeping rates elevated, at least for the foreseeable future and even when there is a full return to normal and a fully - implemented network of carrier services several months later.

Market Outlook

Turning to the market outlook for the coming months, on the trans-Atlantic (TA) trade specifically, Sand noted that if the U.S. engages in another tariff war against the EU, it will impact both west and eastbound demand. Freight rates would likely drop if there was an immediate implementation. However, demand on the China-Europe trade should see very little knock-on effect as the products moved are very different from those on the TA.

“From a demand perspective, I think we should expect the China-Europe trade to create a surprise on the upside a little bit.”

He highlighted that while the German economy, the locomotive of Europe, is struggling, data revealed record-high imports from the Far East into Northern Europe in December last year.

“So, there seems to be some sort of disconnection between the underlying economic climate and the trend in imports.”

One explanation is front-loading where goods are brought in faster than normally would be the case, in anticipation of market uncertainty as a result of tariff increases and regulatory changes.

This was an option for shippers and manufacturers, whatever the vertical, be it pharmaceuticals or automobiles and a very cost-efficient one too, Sand added.