Five Major Challenges Facing Container Shipping in 2025
CargoesPi shipping news: 6 January, 2025
1. The Red Sea Situation
Lars Jensen, founder and shipping analyst at Vespucci Maritime, commented, "To put it accurately, the situation in 2025 will feel like a rollercoaster, with the Red Sea being a significant uncertainty."
Unless Donald J. Trump can perform a diplomatic miracle to resolve the prolonged crisis in the Red Sea, the container market may hit rock bottom with freight rates significantly declining. Trump, set to be inaugurated as the 47th President of the United States on January 20, has pledged to end all wars within the first 24 hours of his presidency. However, experts remain skeptical of this promise.
Peter Sand, Chief Analyst at Xeneta, expressed doubt, stating, "I have little confidence in his claim to stop all wars within 24 hours. He doesn’t have the authority to take such global action in such a short time."
The Red Sea Crisis Remains a Threat
Peter Sand also emphasized Trump's "America First" stance, questioning why the U.S. would intervene militarily in Yemen. He believes the Houthis’ attacks on international merchant fleets at the entrance to the Red Sea will continue to be a significant threat into 2025.
Military analysts note that while Iran, which supports the Houthis, has weakened due to the collapse of the Assad regime in Syria and Israel’s defeat of Hezbollah in Lebanon, this doesn’t change the ongoing crisis in the Red Sea. Although bypassing the Red Sea via routes around southern Africa has increased costs and transit times, it has also boosted revenue for shipping companies.
Jensen remarked, "2025 will rise and fall with the Red Sea. If the crisis persists, shipping companies will have another strong year, albeit not as strong as 2024 due to the arrival of more vessels."
Sand agreed, noting the Red Sea crisis will play a critical role in determining whether 2025 will be profitable or challenging for shipping companies.
2. Potential Strikes
The risk of strikes at ports on the U.S. East Coast and Gulf of Mexico remains a pressing concern. A large-scale port strike involving up to 45,000 dockworkers could occur as early as January 15, 2025, if no new labor agreement is reached.
Sand commented, "We are likely to see another strike, and this time it may last longer. Any strike, whether one day or a week, will cause disruption, particularly for U.S. exporters."
Importers, however, have already booked additional space on container ships to prepare for potential port closures.
3. Tariff Barriers
Trump's election has also accelerated early shipments by importers. He has announced plans to impose a 25% tariff on goods from Mexico and Canada, as well as higher tariffs on Chinese products. This has created challenges for shippers and freight forwarders, who must adapt their networks to the changing landscape.
Sand noted, "Manufacturers and importers must figure out how to circumvent these tariff changes. Some may resort to re-labeling goods to indicate different countries of origin, such as 'Made in UAE' or 'Made in Brazil.'"
4. Trump's Policies
Trump's trade policies could lead to further adjustments in the supply chain, with implications for both importers and shipping companies. Sand highlighted the potential impact on industries like automotive manufacturing, particularly with increased tariffs on imports from Canada.
5. Shipping Alliances Reshuffled
2025 will also see a reshuffling of container shipping alliances, providing shippers and freight forwarders with new choices. The Gemini Alliance, a collaboration between Maersk and Hapag-Lloyd, will launch on February 1, reintroducing the hub-and-spoke model.
Sand commented, "It will be interesting to see whether Gemini's strategy succeeds or if MSC's independent approach prevails. These differing strategies offer opportunities for shippers to negotiate better services and potentially lower prices."