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The Merchant · n°127 · December 12, 2024

January port strike “looks inevitable”

Figure of the week

13.2% CMA CGM became in November the leading shipping line on the transpacific trade (Asia-North America), with 13.2% market share, according to Alphaliner, edging out Maersk (13.1%) by a hair.

Quote of the week

“The air freight sector’s proven adaptability in the face of rapidly evolving geopolitical and economic situations risks being severely tested as Trump’s agenda unfolds.” Willie Walsh, director general of IATA (International Air Transport Association).

Asia-Europe: the December 1 GRIs had an effect

With its usual one-week lag on the real situation, Drewry’s World Container Index saw its Asia-Europe indices explode last week. Xeneta’s XSI Asia-Europe segment also jumped 21.5% over the same period. This clear rise in spot rates stems from the General Rate Increases (GRI) of December 1. And if they also held up well, it is because the market is buoyant and demand is strong in Europe. Expert Lars Jensen expects rates to hold at high levels until Chinese New Year, in late January. According to the Shanghai Containerized Freight Index (SCFI), ahead of the WCI, spot rates have stabilized in recent days (-0.3% on Asia-North Europe according to the latest reading). “At this year’s end, capacity is limited and ships will stay full for the next three weeks, but we cannot for all that speak of a capacity crisis,” explains Héloïse Roux, ocean expert at OVRSEA, who predicts a stabilization of rates until the end of the year.

Let us not forget, finally, that the contract rate negotiation season is open. The first contracts signed on the Asia-Europe trades seem to reach levels well above those observed a year ago. The bank HSBC predicts, moreover, “a significant increase in contract rates in 2025, compared to 2024.” On the spot market side, a fall could occur in February-March, under the effect of overcapacity. Indeed, the introduction of the new alliances and their networks should not encourage carriers to reduce the deployed capacity, all this in a quiet period, which could create a strong temporary rate decline. But a plunge would not mean low spot rates all year, in any case not as long as the Red Sea crisis continues.

United States: the awaited awakening of the Transpacific

The Transpacific trade remains quiet. No pre-CNY peak has materialized and spot rates have been declining for five months. The fall even accelerated last week. But until when? For Drewry, the rebound in rates could occur as early as this week, in anticipation of the possible strike on the East Coast in January, and the rush it may trigger. “I do not expect this weakening of the Transpacific to continue,” opines expert Lars Jensen. The upturn in activity should make itself felt and it is not for nothing that the shipping lines have planned GRIs on December 15.

On the East Coast, the market remains tight on the transatlantic axis in the Europe-United States direction, notes OVRSEA. It will no doubt remain so until the end of the year, due to strong demand. Spot rates could then fall back in January, the traditional start of the slack season on the trade… unless of course a strike paralyzes the US ports of the Atlantic coast and the Gulf of Mexico starting January 15. A scenario that is still credible.

In any case, the forecasts for US imports remain high for the next four months. According to the Global Port Tracker of the NRF and Hackett Associates, they are already up nearly 14% year on year in December, far more than the previous estimate of 6%. In January, the NRF then forecasts +12%, before a temporary decline in February (-4%, but well below the -9.3% previously put forward), followed by a strong rebound of 13% in March then 6.6% in April. For now, Trump’s victory does not darken the outlook, quite the contrary.

2025, the brake on air freight?

The year 2024 will go down in the annals as a formidable vintage for air freight. Tonnages and rates sharply up, explosion of e-commerce… In October alone, according to IATA director general Willie Walsh, air freight yields were up 10% compared to October 2023 and even 49% compared to October 2019. But “while 2024 is shaping up to be a record year for air freight, we must approach 2025 with a certain caution,” Willie Walsh qualified. The reason: the increases in US customs duties, “likely to upend global supply chains and undermine consumer confidence.” To this, add the forced slowdown of Chinese e-commerce. Washington as well as Brussels seem determined to want to rein in Temu and Shein in their commercial offensive.

New sector observers thus expect to see the air freight growth rate cut in half (at least) next year. DSV estimates it will even stay flat, after an 11% gain this year. Xeneta is more nuanced, betting on demand growth between 4 and 6%, versus 4 to 5% growth in capacity. Rotate for its part thinks that demand growth will remain below that of capacity.

In the meantime, on the ground, the peak season from China seems to have peaked: rates should begin to cool starting next week. Impressive detail, e-commerce shipments would currently absorb nearly two thirds of the available capacity on aircraft departing from China!

👋 See you next week, The Merchant team

Sources

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