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The Merchant · n°135 · February 20, 2025

Volatility forces shippers into tough contract choice...

Figure of the week

$500,000,000 Maersk’s alliance with Hapag-Lloyd is expected to save this amount in the second half of the year, according to Vincent Clerc, CEO of Maersk.

Quote of the week

“Nothing more, nothing less!” Donald Trump announces, on February 17 on X, that the United States will apply reciprocal tariffs to all countries that apply them to American products (see below).

A post-CNY recovery in troubled waters?

After a month of February marked by low shipping volumes following the Chinese New Year, will the shipping lines manage to reverse the trend? Nothing is less certain, as the balance between supply and demand remains fragile and uncertainties are piling up on several fronts.

As we enter the third and final week after the CNY, the slowdown continues. According to the latest data from the World Container Index (WCI), rates between Shanghai and Rotterdam fell by 8%, and those between Shanghai and Genoa by 10%. This price correction comes against a backdrop of a generalized slowdown in demand in Europe, reinforced by the caution of importers and the saturation of stocks. To counter this decline in rates and in order to reverse the trend, the shipping lines have announced General Rate Increases (GRI), between +1,500 and +2,000 USD on SPOT/FAK rates. It remains to be seen whether these increases will actually be applied, or whether the market will quickly absorb them. To cope with rather sluggish demand and congestion in the ports of northern Europe, the carriers are resorting to blank sailings in March.

These capacity reductions are inseparable from the ongoing restructuring of the maritime alliances. The reorganization of networks between Asia and Northern Europe is expected to lead to an 11% decrease in total weekly capacity, falling from 249,000 to 221,000 TEU. This decline stems both from the end of the vessel-sharing agreements between 2M and THE Alliance and from the emergence of new alliances, notably Gemini Cooperation and Premier Alliance.

Many companies have postponed their annual tenders while waiting for the end of the Chinese New Year festivities, hoping to benefit from more favorable conditions. Furthermore, in order to secure volumes under contract, some carriers are offering discounts of up to 28% on contracts of more than six months, which reflects the current complexity of negotiations between shippers and shipping lines. This divergence between SPOT and long-term contracts is impacting shippers’ practices, opening up a “fascinating negotiation dynamic between buyers and sellers,” according to Emily Stausbøll, analyst at Xeneta.

No Valentine’s Day for tariffs

On Friday, February 14, JD Vance gave a much-noticed speech at the Munich Security Conference. In the middle of Valentine’s Day, the vice president clearly intended to signal that the transatlantic relationship was at its lowest since 1945. Three days later, Donald Trump published a text on X in which he set out his administration’s position in the tariff conflict opened since his inauguration: the United States will impose reciprocal tariffs equal to those charged by other countries, notably including VAT systems, non-monetary trade barriers and subsidies deemed unfair. This sounds the end of an international trading system inaugurated in 1948 with the General Agreement on Tariffs and Trade (GATT).

It is a shift of such magnitude that it is not without generating real tensions within the Republican party, with some voices rising against a possible tariff war that would heavily impact American industry.

Yet, in the short term, the effect on American ports seems limited. Trade with the first nations targeted by Trump - mainly Canada and Mexico - depends largely on road and rail freight. Despite the announcement of a 10% increase on Chinese products, port traffic remains relatively stable. Recent assessments report 2.11 million TEU in January and 1.96 million in February in American ports (excluding the port of New York/New Jersey and the port of Miami), reflecting both the resilience of the port sector and the growing adoption of frontloading since the announcement of the new tariff plans by the Trump administration.

But the evolution of relations between the United States and Europe could durably alter the commercial landscape. The recent implementation of the reciprocal tariff plan - aimed at correcting what the administration calls “commercial injustice” - has provoked a virulent reaction from the European Commission, which believes that such measures “tax American citizens, increase costs for businesses and hold back growth.” Furthermore, the gradual erosion of transatlantic relations risks reorienting global flows. Adjustments are already being observed on other routes: the volumes of containers shipped from China to Mexico, for example, increased by 76% between 2019 and 2024, and those to Canada by 54% over the same period. If new tariff measures were to expand, the dynamic could push more companies to rethink their strategies, or even modify their freight routes, in order to minimize long-term economic impacts.

In sum, one question arises: who will benefit from the transatlantic rupture?

China imports: a chaotic market

The post-CNY recovery is not currently taking place in air freight, which is going through a period of tariff stagnation. The sharp decrease in e-commerce volume, accentuated by the annual holidays and factory closures, is keeping prices low. This situation translates into massive flight cancellations, which support prices while reflecting the overall lack of demand.

In the coming weeks, the consequences of these flight cancellations should be felt on the market, with a slight rise in rates due to the reduction in supply, but this increase could remain moderate because of overall weak demand. This significant drop in volumes - with notable decreases compared with 2024 - and the recent announcements by the Trump administration on the removal of the de minimis rule, suggest a persistent fragility of air freight originating from China in the weeks to come.

A Cornelian dilemma for the maritime industry: LNG or methanol?

The International Maritime Organization’s emissions reduction targets for 2030 are drawing closer. According to an analysis by Greg Knowler for the Journal of Commerce, the maritime industry today faces Cornelian strategic choices concerning alternative fuels, notably LNG and methanol, which together accounted for 70% of orders for new ships in 2024. The dilemma is exacerbated by major uncertainties over the large-scale availability of these fuels and the evolution of environmental regulations. In short, long-term planning is particularly arduous for shipowners. Is it any surprise that discontent is rising among them against the use of biofuels?

👋 See you next week, The Merchant team

Sources

Go further

How much does a freight forwarder cost, and how to avoid hidden fees? → How to import from China to Europe, step by step → BAF, GRI, demurrage: how to read the surcharges on your freight invoice →

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