Container Shipping Sector Fourth Quarter Results

The container shipping industry had total net income of $15.8 billion in 4Q24, an $11.0 billion and 41.0% decrease sequentially from the $26.8 billion earnings reported in 3Q24. Compared to last year's fourth quarter, net income in this quarter represented an increase of $16.5 billion from the $0.7 billion loss in the year ago quarter. This quarter was a reversal after three straight quarters of exponential bottom line increases following the year ago net loss that itself was the nadir of six straight quarters of earnings decline. Driven by the capacity tightening resulting from the Red Sea situation and augmented by robust volume, the sector moved to a $5.4 billion 1Q24 profit that was doubled in 2Q24 and then more than doubled again in 3Q24. The factors in play are discussed in a later section. Prior to this reversal, the industry experienced a downward earnings trend for six quarters from the earnings peak of $63.1 billion in 2Q22. The remarkable history in actual sector net income over the last 35 quarters along with the trailing four quarter average net income number is shown in the chart below.

This sharp upward trend in earnings the last three quarters follows six straight down quarters which themselves came after seven straight up quarters that each set a record for industry net income. Just as pricing drove those roller coaster results, it was the driver in the most recent quarters. The difference is that the catalyst for the latter was pricing increases emanating out of the Red Sea situation. The actions of the Houthi terrorists have resulted in most container ships in the Asia to Europe trade lane avoiding a Red Sea routing in favor of the longer routing around Africa. That key lane represents some 25% of global container miles and the one-third increase in typical voyage distance has the effect of shrinking worldwide capacity 8%.

In addition, sector pricing has also been favorably influenced by strong worldwide volume. The fourth quarter saw a 5.7% year over year increase that followed even stronger 4.0%, 5.7% and 7.7% increases in the third, second and first quarters. This volume growth has led to 4Q24 being the largest worldwide volume quarter ever. The level and trend of pricing and volume in the sector is examined in detail in a later section. The container shipping industry has literally gone from being at the bottom in terms of overall industry performance to being at the top when net income as a percent of revenue is used as the yardstick. It peaked during the pandemic at the same time the service it provided was the worst and then decelerated just as fast as it went up. The industry is now on the backend of another smaller roundtrip move up and down. In the four years from 2016 through 2019 prior to the pandemic, the industry experienced a cumulative loss of $8.5 billion on revenues of $681.2 billion during that four year period for a negative 1.3% margin of net income to revenue. Since the 2008 financial crisis and up until the pandemic, the container shipping sector experienced poor overall results owing to chronic over capacity.

The pandemic changed the supply/demand dynamic that drives sector pricing primarily through congestion that had effect of constraining supply. In contrast to four years of negative margins prior to the pandemic, in the five years of 2020, 2021, 2022, 2023 and 2024 the industry achieved net income to revenue margins of 8.1%, 36.8%, 42.7%, 9.7% and 18.4%, respectively. The peak 46.1% margin in 2Q22 is likely the highest overall margin achieved by any industry in a single quarter in history. In the latest quarter, industry net income as a percent of revenue was 19.0% in 4Q24, a contraction from the 28.4% in 3Q24 but sharply above the negative 1.2% measure in the year ago quarter. The chart below shows the actual margins over the last 36 quarters along with the trailing four quarter average.

While the $15.8 billion in net income for 4Q24 was well below the seven most profitable quarters during the pandemic era, excluding that period the 4Q24 profit is more than twice what the container shipping industry earned in any previous full year. Similarly, the 19.0% margin in 4Q24 is many times the net income margin in any quarter prior to the pandemic.

Actual Resutls by Carrier

The following table recaps the overall actual net income for 4Q24 versus

4Q23 and the related variances from the 11 container operators that issue financial reports. Also shown are the actual results for the last twelve-month periods ending with those quarters along with the related variances. The table includes cumulative net income for the full nine year period from 2016 through 2024. The companies are listed in order from low to high in terms of cumulative net income since 2016. All amounts are in millions of dollars.

Company	4024	4Q23	4Q Var	LTM 4024	LTM 4Q23	LTM Var	2016-2024
Zim	553	-147	700	2,144	-574	2,718	10,518
HMM	621	228	393	2,707	771	1,936	12,212
K Line	547	-16	563	1,829	515	1,314	12,227
Mitsui OSK	461	-18	479	1,439	500	939	12,872
Yang Ming	403	1	402	1,999	153	1,846	13,742
NYK	463	-4	467	1,740	649	1,091	14,699
Evergreen	931	103	828	4,369	545	3,824	24,767
Hapag Lloyd	1,100	-234	1,334	2,893	3,229	-336	35,984
COSCO	1,784	332	1,452	7,558	3,406	4,152	44,770
CMA CGM	1,530	-90	1,620	6,181	3,640	2,541	54,206
Maersk	1,812	-596	2,408	4,716	3,096	1,619	56.420
Subtotal	10,205	-441	10,646	37,576	15,932	21,644	292,888
% Of Total	64.5%	64.5%	na	64.5%	64.5%	na	64.5%
Grand Total	15,822	-684	16,505	58,257	24,700	33,557	453,771

Note: Maersk net income is estimated as they just report EBIT by allocating items below EBIT based on container division percent of total revenue. Profits for Japanese shipping companies is just reported container results and is the calendar quarter figure rather than the fiscal quarter framework used by those companies. Asia based companies report results in their local currency that is converted to dollars at then current foreign exchange rate. Obvious major one-time charges are excluded.

The actual fourth quarter results brought the last twelve months industry net income to $58.3 billion, a $33.6 billion or 135.9% increase from the $24.7 billion net income for the twelve months ending 4Q23. While the latest twelve month net income is geometrically above any year prior to the pandemic, it pales in comparison and is 76.3% below the peak twelve month profit of $233.2 billion achieved during the twelve months ending 3Q22.

The far right column in the table above is noteworthy, as every company has now crossed the threshold of more than $10 billion in cumulative net income since 2016. That level of collective actual profitability in the industry would have been absolutely unthinkable to anyone five years ago.

In individual comparisons to last year, all eleven companies had much higher net income in the latest quarter with three digit percent increases and more. Ten of the eleven companies had increases in net income over the last twelve months versus the prior period with an average increase of 135.9%.

The largest such variances were among the smaller Asian carriers that are more concentrated in the transpacific east-west trade lane.

The relative actual performance among companies during 4Q24 showed a wide dispersion but one that was continuing to trend down at the extremes.

Using net income to revenue margins as the yardstick, 4Q24 showed a high of 30.3% and a low of 10.4% for a total range of 19.9%. That is a sharp retrenchment from recent results and the smallest quarterly range over the last two years. For comparison, the total range was 31.8% in 3Q24, 24.2% in 2Q24, 23.5% in 1Q24, 26.8% in 4Q23, 27.5% in 3Q23, 35.1% in 2Q23 and 37.9% in 1Q23. Similar to recent quarters, the European carriers had margins that were notably below the other carriers.

In contrast, most of the pandemic era quarters had tighter spreads among the companies. The widening differences among the companies are primarily due to customer mix, trade lane mix and vessel utilization. Carriers whose volume is more concentrated in the key east-west trade lanes of Asia-Europe and Asia-North America showed the most robust sequential declines in 4Q24 compared to 3Q24. Those were the lanes with the most pricing reductions and that is clear from the later graphs. As is apparent from reviewing the tables, there is also a correlation between carrier size and more stable performance. However, the current focus of my reports is overall industry results and actual macro trends and not individual companies.

The overall industry net income to revenue margin was 19.0% in 4Q24, a sharp 20.2 percentage point improvement from the negative 1.2% margin in the year ago quarter. Compared sequentially to the 3Q24 however that margin was down 9.4 percentage points from 28.4% in that quarter. The table below recaps total revenue, net income and related margin by carrier for both 4Q24 and 4Q23 along with the year over year percent change in each. The companies are listed in the same order as in the initial table above. Note the way we calculate container revenue for the individual Japanese companies in footnote likely distorts the individual revenue change measures for this quarter but not the composite industry measures.

Company	Revenue 4Q24	Net Inc 4Q24	Margin 4Q24	Revenue 4Q23	Net Inc 4Q23	Margin 4Q23	% Var Revenue	% Var Net Inc*	% Var Margin
Zim	2,170	553	25.5%	1,205	-147	-12.2%	80.1%	476.2%	308.9%
HMM	2,186	621	28.4%	1,561	228	14.6%	40.1%	172.3%	94.4%
K Line	1,802	547	30.3%	871	-16	-1.9%	106.9%	3445.7%	1717.1%
Mitsui OSK	1,518	461	30.3%	978	-18	-1.9%	55.2%	2610.4%	1717.1%
Yang Ming	1,722	403	23.4%	1,026	1	0.1%	67.8%	39744%	23646%
NYK	1,526	463	30.3%	1,508	-4	-1.9%	1.2%	12447%	1717.1%
Evergreen	3,320	931	28.0%	2,176	103	4.7%	52.5%	805.3%	493.5%
Hapag Lloyd	5,400	1,100	20.4%	4,079	-234	-5.7%	32.4%	570.1%	455.1%
COSCO**	9,441	1,784	18.9%	5,665	332	5.9%	66.7%	436.7%	222.1%
CMA CGM	14,680	1,530	10.4%	10,570	-90	-0.9%	38.9%	1800.0%	1324.0%
Maersk	9,902	1,812	18.3%	7,180	-596	-8.3%	37.9%	404.1%	320.5%
Subtotal	53,668	10,205	19.0%	36,820	-441	-1.2%	45.8%	2413.4%	1687.1%
% Of Total	64.5%	64.5%	na	64.5%	64.5%	na	na	na	na
Grand Total	83,205	15,822	19.0%	57,085	-684	-1.2%	45.8%	2413.4%	1687.1%

Note: The three Japanese shipping companies report net income in the container shipping joint venture they operate on equity basis. They don't individually report revenue. It is estimated using reported net income and assuming margin equal to overall margin reported by ONE. Note that while most of the container services operated by the Japanese companies are under the ONE brand, they each have short sea services that they operate separately. The net incomes from those are included in the above table and the assumption is that they have the same margin as the joint services operated under the ONE brand. The amounts for those companies are shown on a calendar quarter basis rather than the fiscal quarter framework used by those companies. *Net income and margin percent change signs reversed on all companies with negative year earlier results, an analytical approach to make the resulting more meaningful. **COSCO 4Q24 revenue is estimated based
on same percent change compared to 3Q24 actual as Maersk and CMA CGM combined with figure updated when actual revenue disclosed. 

The results of CMA CGM, COSCO and HMM include terminal affiliates not directly related to their own core container shipping business. Those margins were not as high during most of the pandemic that had the effect of making its net income to revenue ratio lower than it otherwise would be. As overall results declined, the margins of the more stable terminal business have had the opposite effect. The net impact of this is marginal and the countervailing effects in the latest periods show this. Excluding the three companies, in 4Q24 the margin would have been 3.9 percentage points higher, while in 4Q23 it would have been 3.6 percentage points lower. As such, they are not material in terms of overall core container shipping margins and as the previous analysis showed tend to net out against each other over time. The results of COSCO include OOCL that was acquired in 2018 and OOCL is consistently at or near the top in terms of performance. The results of COSCO and HMM are buoyed by large grants and subsidies provided by their respective governments. For example, the annual 2023 results of COSCO disclose direct grant and subsidy amount in 2023 was equivalent to $417 million, more than the total profit in the fourth quarter
and 132% above total 2022 subsidies from the government of $180 million.

Container Market Volume & Rate Trends

Container Trades Statistics (CTS) is an affiliate of a non-profit company whose members include the top global container shipping companies and the data it provides comes from those members. Its figures represent the actual universe of whatever is being measured. By definition, they represent the most reliable factual information available on container shipping volume and pricing levels and trends. 

The CTS data shows that worldwide container volume was up 5.7% in the fourth quarter compared to the same quarter last year. That represented a step up from 4.0% year over year increase in the third quarter, the same as the 5.7% increase in the second quarter and a contraction from the 7.7% increase in the first quarter. However, that 7.7% gain represented the peak increase in the fifth straight quarterly extension that saw increases of 7.2% in the fourth quarter and 3.7% in the third quarter and decreases of 3.6% in the second quarter, 6.9% in the first quarter and 9.2% in the fourth quarter. The 5.7% increase in the fourth quarter was the third strongest quarterly gain in 14 quarters. For the full twelve months of 2024, the increase came in at 5.7% and the second biggest annual change in 13 years after the 7.4% increase in 2021. The total 2024 volume of 183,219,339 TEU set a new annual record. To put that into perspective, that volume is actually 1.4% above the 180,615,787 TEU volume for 2021 in the middle of the pandemic.

The worldwide loaded TEU volume of 47,214,834 in the fourth quarter was up 0.9% sequentially compared to the third quarter. It was also the highest worldwide volume quarter ever and 0.9% above the previous record set in 3Q24. For comparison, overall US loaded container volume of 8,707,083 TEU's (71.4% imports/28.6% exports) in the fourth quarter showed an 8.3% year over year increase and a 3.8% decrease sequentially compared to the third quarter. A more detailed analysis of US container volume can be seen in my latest monthly container volume report for January that was issued on March 4 and available in your inbox. I anticipate the report for February will likely be issued within one week. 

The global pricing index maintained by CTS is based on all the loads that actually move on vessels, both those moving under contract rates and those moving at spot rates. The index is calculated on all ocean revenue including vessel fuel and other shipping surcharges but excludes inland transportation items in order to result in directly comparable port to port measurements. 

The large majority of loads, particularly those in US trades, move under contracts with a typical one-year term. Spot rates are given much more attention than they deserve in the media, both because they impact only a minority of loads and are based on surveys that aren't always linked to loads that actually move. The CTS global pricing index is a factual measure of the level and trend of overall container shipping pricing. Not surprisingly, I have found this universal measure correlates very closely with overall sector earnings when adjustments are made for fuel surcharge/cost and inland transportation items. Only the CTS global pricing index and other aggregate pricing measures give real insight into actual container shipping pricing. 

The CTS global pricing index shows that total revenue per load in the fourth quarter was 35.4% higher compared to last year's fourth quarter and 16.0% lower sequentially compared to the third quarter of this year. Note that the year over year and sequential comparisons were both effected by slightly lower fuel surcharges/costs. The global pricing index maintained by CTS uses 2008 as the base case set at 100. In the fourth quarter, the global pricing index averaged 94.3 with December being slightly higher at 96. Reviewing its recent history driven by the Red Sea situation, the index turned up in December 2023 to 71 and expanded to 88 in January, 89 in February followed then by minor dips in March and April. From there, it then increased to 89 in May, 101 in June and 118 in July before declining to 115 in August, 104 in September and 93 in October before slightly rebounding in November and December. The turnaround last December, driven by the Red Sea, was the first increase since decreasing for 17 straight
months after the June 2022 peak of the CTS global pricing index at 204. 

The aggregate pricing changes in the fourth quarter were slightly impacted by lower fuel costs. The cost of very low sulfur fuel oil, the most widely used vessel fuel currently, was 8.6% lower in the fourth quarter than it was in last year's fourth quarter. Compared sequentially to the third quarter, fuel costs in the fourth quarter were 3.9% lower.

Based on actual fuel costs per ton, the total fuel expense for the container shipping industry is estimated at $6.7 billion in the fourth quarter. That total fuel cost amount was equivalent to 7.8% of total industry revenue in 4Q24.

With the simplifying assumption that differences in fuel surcharges were the same as changes in fuel costs, the impact of the fuel component on changes in the CTS global pricing index can be estimated. My calculations show that if fuel cost had been the same this quarter compared to a year ago, the CTS index would have increased 35.7% instead of 34.5%, a fuel related variance of 3.5%. Compared sequentially to the third quarter, the same exercise would have had the CTS index decreasing 15.5% rather than 16.0%, a fuel related variance of 3.4%.

Comparing 4Q24 to 4Q19 before any pandemic pricing impact, the most prominent spot index is up 172.4% versus the 42.2% increase in the CTS pricing index. The ratio between the two had the former increase equivalent 4.1 times the latter in the fourth quarter. The relationship between those two measures, and the average contract rate trend that can be developed from comparing the two, should be kept in mind when reflecting on pricing levels and trends.

The CTS index began its pronounced move upward from the low 70's in the fourth quarter of 2020. You can see this in the following table showing global container volume along with the CTS index over the last 21 quarters.

The table also includes actual averages on the Shanghai Containerized Freight Index (SCFI), a composite measure of all outbound spot rates out of China and the most followed container spot index. The monthly data for all measures from July 2021 through February 2025 is also included. January is the latest month for which CTS data is available.

Period	CTS Global TEU's	CTS GPI Ave	SCFI Spot Ave
4Q19	43,151,500	66.3	825
1Q20	38,764,700	69.3	931
2Q20	39.319.686	70.7	892
3Q20	44,325,855	71.0	1181
4Q20	45,829,960	84.0	1900
1Q21	43,214,304	112.0	2770
2Q21	46,155,341	132.0	3307
3Q21	45,346,421	171.3	4310
4Q21	45,899,721	186.7	4683
1Q22	42,827,925	197.0	4859
2Q22	45,361,767	200.0	4208
3Q22	43,365,287	189.7	3285
4Q22	41,672,673	135.3	1436
1Q23	39,866,656	100.7	977
2Q23	43,728,406	83.3	986
3Q23	44,985,333	73.7	987
4Q23		69.7	1018

1Q24	42,935,388	87.3 2039
2Q24	46,231,781	91.0 2582
3Q24	46,776,190	112.3 3074
4Q24	47,214,834	94.3 2247
July 2021	15,058,574	161 4037 172 4309
August 2021	15,511,653	181 4585
September 2021 October 2021	14,776,194 15,384,139	184 4600
November 2021	15,251,231	185 4562
December 2021	15,264,351	191 4887
January 2022	14,836,191	204 5051
February 2022	12,845,229	195 4939
March 2022	15,146,505	192 4587
April 2022	14,485,908	196 4243
May 2022	15,579,443	200 4162
June 2022	15,296,416	204 4220
July 2022	15,083,033	202
August 2022	14,780,419	193 3472
September 2022	13,501,835	174 2344
October 2022	13,962,977	151 1790
November 2022	13,704,722	134 1390
December 2022	14,004,974	121 1129
January 2023	13,191,975	107 1035
February 2023	11,886,578	101 981
March 2023	14,788,103	94 916
April 2023	13,909,488	88 1007
May 2023	15,067,752	83 987
June 2023	14,751,166	79 964
July 2023	14,880,213	75 972
August 2023	15,245,965	74 1032
September 2023	14,859,155	72 956
October 2023	15,069,986	69 890
November 2023	14,739,979	69 934
December 2023	14,873,462	71 1230
January 2024	14,542,634	88 2131
February 2024	13,242,391	89 2165
March 2024	15,150,363	85 1820
April 2024	14,663,143	83 1803
May 2024	15,966,610	89 2503
June 2024	15,602,028	101 3439
July 2024	15,680,509	118 3600
August 2024	16,071,344	115 3186
September 2024	15,018,909	104 2435
October 2024	15,866,623	93 2111
November 2024	15,397,235	94 2256
December 2024	16,017,540	96 2373 94 2203
January 2025 February 2025	15,392,288 na	na 1692
4Q24 Vs 4Q23	5.7%	35.4% 120.7%
4Q24 Vs 3Q24	0.9%	-16.0% -26.9%
4Q24 Vs 4Q19	9.4%	42.2% 172.4%
Dec 24 Vs Dec 23 Dec 24 Vs 4Q19	7.6% 11.3%	35.2% 92.9% 44.7%

While most container ships continue to avoid the Red Sea, the attacks by the Houthis have reduced and the expectation is there could be some resolution where most ships could begin safely using the Suez Canal again. If and when that occurs, it will unwind the previous capacity reduction and have the effect of increasing worldwide container shipping capacity by some 8%. The cease fire related to Gaza has increased the expectation of such a resolution. As the table above shows, spot pricing showed a noteworthy decline in February that has continued into March. 

The quarterly trends in various measures of container volume can be more readily seen in the following graph that includes total worldwide container volume, total US inbound and outbound container volume and total US inbound volume. For ready comparison, each is benchmarked to actual 4Q19 volume, which is set to 100.0 for all measures. That quarter is used for the common size graph as it was the last quarter with no volume impact from the pandemic. As such, the tre and lines avoid some of the comparisons to a low base resulting from early pandemic declines apparent in the table.

As the graph shows, all measures of volume declined in the first half of 2020 at the onset of the pandemic before recovering and then increasing. However, the relative growth from then on in various key measures was quite different. Global worldwide container volume in 4Q24 was actually just 9.4% above the 4Q19 level five years ago. That works out to a CAGR of 1.8%, or near growth rates in worldwide container volume just prior to the pandemic but well below long term growth rates. For example, from 4Q17 to 4Q19, worldwide container volume had a 1.7% CAGR. In a broader look at from 2009 to 2019, annual worldwide container volume grew at a 5.0% CAGR. Growth has been more modest in recent years than the multiple of GDP growth rate for container volume growth over broader periods, but it can still be expected to equal or slightly exceed GDP growth. The larger point is that overall growth in global container volume during the pandemic was modest and below what actually occurred in the US.

In 4Q24, total US container volume (both inbound and outbound loads) was 12.3% above the 4Q19 level, equal to a 2.3% CAR during that period. Because outbound containers from the US were actually down 16.1% over that period, the growth performance related to inbound containers was significantly higher. Total inbound containers into the US during 4Q24 were 24.9% above the 4Q19 level, the equivalent of a 4.6% CAGR. The most pronounced volume spikes during the pandemic occurred related to boxes moving into the US. It was those spikes in a large and key trade lane (Asia to North America represents approximately 25% of worldwide container miles) that set in motion a series of events that brought about the problems in the maritime supply chain. It was less the volume itself and more the capacity contractions caused by port congestion along with the lumpiness of that volume that resulted in the favorable supply/demand dynamic for carriers. That in turn resulted in an unprecedented rise in
pricing worldwide. 

The overall impact on worldwide container shipping pricing can readily be seen in the following common size graph which also uses 4Q19 as the base because it was before any impact of the pandemic. Starting with the same global volume measure as in the previous graph, it then layers in the relative change in the CTS global pricing index. That is the most relevant actual pricing measure based on all loads that move and results from data provided by all of the carriers. With 4Q19 set at 100.0, the noteworthy difference is that in 4Q24 global volume was at 109.4 while global pricing was at 142.2. Those measures translate into increases of 9.4% and 42.2%, respectively. In other words, just looking at 4Q24 and comparing it to the last quarter before the pandemic, pricing has increased more than four times compared to the increase in volume. The differences in those two measures also showed significant gaps during earlier periods covered by the chart. It is clear from this chart of actual data that volume alone has not been the driver of actual overall pricing changes these last five years. The key catalyst was the underlying changes in capacity. 

The overall CTS global pricing index is by definition comprised of the large majority of loads that move under contract rates as well as the small number of loads that move under spot rates. Both the prevalence and credibility of spot rates are misunderstood. While there is an information content in the level and trend of spot rates, they always need to be analyzed in the context
of what is occurring with the more important contract rates.

Most of the spot indices exhibit multicollinearity given the similar survey processes and data used in their construction. The most widely followed spot indices after the SCFI come from British maritime  consultancy Drewry. Their broadest index is the Drewry World Container Index (WCI), which in 4Q24 had an average level that was up 148.0% compared to 4Q19. That is below the 172.6% that the SCFI was up over the same period. While often similar, the Drewry WCI had a peak that was higher and earlier than the SCFI. Another widely followed Drewry spot index is based on Shanghai to Los Angeles rates. While it had an average 4Q24 level that was 216.0% higher than 4Q19, it peaked even higher and earlier than the WCI. 

Spot rates in the Asia to US lane, our largest container trade lane, have continued to show more relative strength recently compared to other spot rates. This is evident from comparing 4Q24 Drewry spot rates to what they were a year ago during 4Q23. In the latest quarter, the Shanghai to Los Angeles spot rate average was up 136.1% compared to a year ago while the WCI was up 122.5%. 

The following chart compares the actual average quarterly trends in those spot indices to the actual average quarterly trends in three indices of overall aggregate pricing. In addition to the key CTS global pricing index, the latter group includes quarterly aggregate pricing indices disclosed by Ocean Network Express (ONE), the consortium comprised of the container operations of the three large Japanese shipping companies. They disclose the overall pricing index for their two largest trade lanes, Asia to North America and Asia to Europe. Those indices are calibrated with 2008 set as the base at 100, just like the CTS global pricing index. The spot indices are shown in red and the overall aggregate indices are shown in blue, with the key indices shown as solid lines. Here again the detachment of various aggregate pricing measures from spot indices can be seen as it is clear that contracts are not consistently being reset at the then current spot pricing when the typical one year contracts are renewed. 

It is noteworthy that the indices were higher than the CTS for most of the period. The ONE Asia to North America aggregate index is particularly relevant related to inbound containers into the US because Asia is the origin of two-thirds of those boxes. In 4Q24 compared to 4Q19 before the pandemic, the ONE Asia to North America index was up 52.9% while the CTS index was up 42.2%. The ONE Asia to Europe index was up more than twice both measures at 119.1%. Recent changes in those pricing indices have shown the most strength. Comparing 4Q24 to 4Q23, the ONE Asia to North America index gained 47.2%, the CTS index gained 35.4% and the ONE Asia to Europe index gained 105.7%. In sequential comparisons to 3Q24, those indices were down 18.5%, 16.0% and 25.6% respectively. 

The best factual information on overall container shipping pricing comes from the CTS data and other aggregate measures of all the actual loads moving. The credibility of spot indices in the container sector should be taken with a grain of sea salt. As the graph shows, at times in the recent past there have been material differences in the changes in spot rates that purport to be measuring the same thing. While the average numbers coming out of them are precise, it is not altogether clear what they are measuring. They certainly are not measuring the universe of what is actually happening and there is almost no comparison to spot indices in the bulker or tanker segments where they are everything and represent actual transactions. 

While spot rates only move a small minority of loads, they do impact the negotiations related to renewing contracts that move the large majority of loads. It is in that more indirect role where spot rate indices have their largest impact in container shipping. They are not an accurate measure of either the level or trend in actual container pricing. The data shows that during the recent ramp up in pricing, when contracts were renewed the preponderance was not renewed at the then current spot rate. If that were the case, the CTS index would have moved much closer to the spot indices over the multiyear period. The best approach in order to understand pricing in the container shipping sector is to view spot rates and contract rates separately and to focus on the aggregate measures of all loads that are moving as the truest measure of the level and trend of real pricing. The dichotomy between the two pricing measures is clear in the graphs and confirmed by the reported results. 

In the most recent ramp up in pricing, however, the historical relationship between those two measures has tightened. When comparing 4Q24 to 4Q19, the most prominent spot index was up 4.1 times the most prominent aggregate index compared to 3.9 times in 3Q24 and 4.9 times in 2Q24. The sharp contraction in 3Q24 was driven by an actual inversion in that quarter when sequentially the spot index was up 19.1% while the aggregate index was up 23.4%. Clearly timing and lag effects are at work here, but in the past few months the CTS global pricing index has responded more immediately to changes in spot rates and the analytical relationship between the two measures bears following.

Implications Of Recent Actual Results 

The large majority of containers move under contracts that are renewed throughout the year and have a one-year term. This is seen in results that have a long tail even as supply/demand conditions change. There is certainly an information content in various spot rates, but one needs to be careful in putting to much stock into them. Contracts can be renewed at rates that have little relationship with spot rates, as it is all fact specific based on the particular contract and its history. The extraordinary profit levels have resulted in unprecedented new vessel orders, with the total order book now at a record level of almost 30% in terms of TEU capacity. Given the physical life of ships and typical construction periods, if someone was optimistic and pegged growth at 5% annually, you need a 20% order book. An order book approaching 30%
could only all be fully utilized if annual growth were in the 10% range. 

However, before concluding that this large order book will inject excess capacity into the container shipping market, its worth noting that the calculations are based on TEU's and a different picture emerges if they are based on the number of vessels. Most of the ships being built are large and on average believed to be at least twice the size of the average container ship in the world fleet. Rather than a 30% increase in TEU's, its no more than a 15% increase in the number of vessels which is more the driver on costs than the number of TEU's. That makes for a much more manageable capacity situation related to new construction. Even recently there has been a continuation of large orders for new container ships, underscoring that the carriers themselves are not overly concerned by the existing order book and see a need for more ships. Overriding all of the newbuilding activity is increased discipline on the part of the industry in blanking or canceling sailings when in their view capacity seems to be getting too high relative to
underlying demand. 

Recent worldwide volume trends are also showing much more strength than has been seen in years. The 5.7% year over year increase in worldwide volume in 4Q24 coming just after the 4.7%, 6.1% and 8.3% increases in 3Q24, 2Q24 and 1Q24 is the strongest increase in recent memory when the two peak quarters of the pandemic (1Q21 and 2Q21) are excluded. In addition, it is likely that carriers will make more use of blanking sailings than they did prior to the pandemic to mitigate the impact of any excess capacity. 

Stronger than expected volume has certainly buoyed rates, but much of the recent pricing strength remains tied to the Red Sea situation that is effectively absorbing 8% of worldwide capacity. This has reinforced what the carriers learned well during the pandemic that disruptions that lead to constraints in capacity can have a much more pronounced impact on pricing than thought before. As noted earlier, however, that situation is now closer to resolution and if that occurs there could be an immediate spike up in container shipping capacity. 

That is a sharp increase in pricing does not come with a noticeable decline in container volume is a factor making the industry less wary of various macro disruptions. While the carriers do not create disruptions, the actual events of the last few years underscore that such events can have highly profitable consequences for the industry. One macro catalyst that could have had a pronounced impact on container shipping was the ILA situation in the US as the ports covered by that union can be linked with an estimated 16.2% of worldwide container miles. However, that matter was settled earlier this year and there was a formal signing of a new six-year agreement this past week. The primary effect of the ILA situation was some coastal shifting in the US prior to the settlement. 

The looming macro catalyst are tariffs that have just been put in place and the planned additional tariffs. My bias against tariffs is obvious from what I've written in these reports and elsewhere. While what this may lead to could be pronounced, it will clearly be felt more in US container volumes than in worldwide container volumes based upon than same 16.2% factor noted above. The resulting economic pain will also be felt most in the US, as it is irrefutable that trade results in collective benefits to the US. 

With the downward trend seen in pricing that has continued this quarter, 1Q25 results will certainly be below 4Q24. My expectation is that industry net income will be below $10 billion. Wherever the actual number comes in will have the benefit of higher overall pricing at the beginning of the quarter than where it is now. I'll hold off with an estimate of overall industry performance for 2025 right now as the tariff situation has injected more uncertainty than usual. The next few months will be very illuminating on what happens in the tariff area, its impact on container shipping and what that results in for the overall economy. 

2025 is certain to be an eventful year for container shipping.