Weekly Supply Chain Update: 27

Container Freight

Trans-Pacific Eastbound (TPEB)

• Carriers implemented a General Rate Increase (GRI) on January 1, with partial adjustments beginning in the second week of January.
• ILA disruption charges, previously announced by carriers such as Maersk, ONE, ZIM, and EMC, are being canceled following a tentative agreement.
• Peak Season Surcharges (PSSs) remain unchanged since the January 1 announcement.
• No significant equipment shortages have been reported at origin. However, with Lunar New Year approaching, increased pressure on equipment and trucking is anticipated, particularly due to potential new tariffs.
• Space remains tight amid the pre-Lunar-New-Year rush, though some availability is reported on West Coast-bound routes.
• Carriers are planning blank sailings around Lunar New Year to manage capacity effectively.

Far East Westbound (FEWB)

• Lunar New Year factory closures (Weeks 3–4) are expected to lower demand slightly, though this will be offset by equipment shortages.
• The pre-Lunar-New-Year shipment surge has not materialized this year due to a shortened production and transportation window between Christmas and Lunar New Year.
• Freight All Kinds (FAK) rates remain elevated at $4,800–$5,000/FEU, driven by carriers' focus on profitable utilisation rather than higher overall volumes.
• Rolling pools will likely be introduced in late January as part of carrier space management strategies ahead of service upgrades in February.
• Flexibility with cargo-ready dates (CRD) and equipment options is advised to minimise delays.

Trans-Atlantic Westbound (TAWB)

• Following a tentative agreement, carriers, including Maersk, ONE, ZIM, and EMC, are canceling previously announced disruption charges.
• Carriers had planned GRIs for January 15 in anticipation of a strike. Updates on adjustments are expected as carriers finalize changes.
• Blank sailings will continue through January, with most alliances scheduling capacity reductions until Week 5.
• New services are expected to launch in February, offering potential changes in market dynamics.

Service Updates

MSC Expands Southern African Network

• NWC to South Africa Service: Direct Europe-South Africa-Namibia connections, including Walvis Bay as a transshipment hub. Revised rotation starts 20 Jan 2025 with MSC Rosaria.
• Namibia Express: Shuttle service linking Cape Town and Walvis Bay launches 8 Jan 2025 with MSC Himanshi III.
• Mozambique Shuttle: Connecting Walvis Bay to Mozambique, Kenya, and Tanzania, launching 14 Jan 2025 with MSC Imma III.

ONE Enhances Baltic Bridge Express (BBX)

• New Rotation: Rotterdam ➔ Klaipeda ➔ Riga ➔ Tallinn ➔ Kotka ➔ Rotterdam.
• Changes: Current BBX ends after Eco Ponente discharges in Rotterdam (7 Feb 2025). Replaces parts of BAX, which ends after Emotion discharges in Hamburg (4 Feb 2025).

Maersk Introduces SLN – Mediterranean Sea C

• Streamlined Service: Merges SLH and SLZ to reduce transit times.
• Rotation: Mersin ➔ Haifa ➔ Alexandria ➔ Fos Sur Mer ➔ Barcelona ➔ Valencia ➔ Algeciras ➔ Casablanca ➔ Port Tangier.
• Launch: Starts 10 Jan 2025 with Nexoe Maersk from Barcelona.

ILA and USMX Strike Six-Year Deal, Averting January 15th East Coast Strike

The ILA and USMX have reached a tentative six-year Master Contract agreement, pending ratification, successfully averting the potential US East Coast strike originally scheduled for January 15, 2025.

In a joint statement, the two organisations announced: “We are pleased to confirm that ILA and USMX have reached a tentative agreement on a new six-year ILA-USMX Master Contract, subject to ratification. This agreement ensures there will be no work stoppage on January 15, 2025.”

The statement emphasised the agreement’s impact: “This deal safeguards existing ILA jobs while setting a foundation for introducing technologies that will generate additional employment opportunities, enhance port safety and efficiency, and modernise East and Gulf Coast ports. These improvements will ensure ports have the capacity to maintain strong and resilient supply chains.”

They concluded: “This is a win-win outcome that supports ILA jobs, benefits American consumers and businesses, and solidifies the U.S. economy as a central hub in the global marketplace.”

Freight Wars Heat Up Ahead of Alliance Reshuffle

Liner operators are cutting Asia-Europe freight rates for early January as they battle for market share ahead of February's alliance reshuffle. On 27 December 2024, the Shanghai-North Europe rate edged up 0.5% to $2,962/TEU, but rate volatility remains high.

MSC will go solo in February after parting with Maersk, which is forming the Gemini Cooperation with Hapag-Lloyd. Meanwhile, the rebranded Premier Alliance will continue Asia-Europe cooperation with MSC.Freight futures reflect market uncertainty. While December 2024 contracts rose 4.4%, February 2025 futures dropped 13% amid fears of rate declines post-Chinese New Year.

Linerlytica notes: “January's muted rate hikes could signal steeper drops in February.” Maersk's $4,800/FEU rate for January has triggered competitors to slash prices, pressuring both spot and futures markets. The stage is set for a turbulent start to 2025 as carriers jockey for position in a rapidly evolving landscape.

Vessels on Order

The container shipping industry has placed a record number of ship orders, with total capacity hitting 8.4 million TEU in November, according to Braemar. This surge, led by MSC (107 vessels) and CMA CGM (103 vessels), mirrors a similar spending spree during the Covid-19 pandemic. However, concerns over oversupply loom, with container supply expected to grow 46% by 2026, while demand is forecasted to rise only 22%.

The surge in profits, fuelled by Houthi attacks in the Red Sea disrupting shipping routes, has encouraged investment. Net profit for COSCO Shipping Holdings is forecasted at 55.4 billion RMB, representing a 95% year-on-year increase. This translates to approximately $7.6 billion USD at the current exchange rate. But analysts warn of risks if the disruptions ease, as overcapacity could drive rates down. Additionally, Trump's potential protectionist policies may weaken global trade further.

While some orders are for fleet renewal, stricter recycling regulations under the Hong Kong Convention, effective June 2025, could delay the removal of older ships. Maersk, with 47 vessels on order, anticipates Red Sea route disruptions will continue into 2025 but acknowledges growing unpredictability in supply and demand dynamics.

Bulk Shipping (as of 07/01/25)

Capesize:

• Activity remains muted post-holidays with bearish sentiment.
• Pacific: Healthy cargo supply but growing tonnage is pressuring rates. C5 index fell to $6.840.
• Atlantic: Oversupply of tonnage and weaker demand pushed the C3 index down to $17.640.
• BCI 5TC average dropped by $711 to $10,696.

Panamax:

• Modest growth with BPI average rising by $190 to $9,548.
• Atlantic: Northern routes show firmness, but bid-offer gaps persist.
• Asia: Steady demand for NoPac trips, with some discounting seen for India and South America repositioning.

Ultramax/Supramax:

• Subdued market with limited new demand after the New Year holidays.
• Rates under pressure in both Atlantic and Asia. The 11TC average declined by $219 to $10,959.

Handysize:

• Quiet start with soft rates in Europe, US Gulf, and South Atlantic.
• BHSI closed at 539, with the 7TC average dropping by $179 to $9,705.
• Limited demand is pressuring prompt owners, while others adopt a wait-and-see approach.

Baltic Dry Index:

• The index fell 29 points to 1,043, snapping a five-session winning streak.
• Capesize index dropped 85 points to 1,290 due to weak iron ore and coal demand.
• Panamax index gained 21 points to 1,061, with daily earnings rising to $9,548.
• Supramax index fell by 17 points to 867, continuing a 17-session losing streak.

Geopolitical Impact:

• Biden administration plans stricter sanctions on Russian oil, possibly increasing premiums for tanker owners.
• Middle Eastern exports could offset reduced Russian volumes, benefiting VLCCs.