Freight costs in global trade: trends and insights

Freight costs continue to play a pivotal role in global trade, influenced by a dynamic landscape of demand, supply and operational challenges.  Freight rates are higher than this time last year, against a background of industry disruption due to the Red Sea Crisis. Diversions around the Cape of Good Hope are expected to continue for now. As we enter a new phase of economic recovery and evolving trade dynamics in 2025, it's more important than ever to understand the key factors shaping freight costs today.

Demand growth remains steady

Despite ongoing economic uncertainties and geopolitical tensions, global container demand has shown resilience, growing close to 7% year-on-year in the first half of 2024. This growth is underpinned by several positive trends:

• Highest container volumes in four years: November and December 2024 are projected to maintain strong demand, particularly for shipments to Europe and the Americas.
• Improved economic outlook: Inflation is stabilizing, with inflation for core goods in G5 economies sitting below zero. GDP forecasts have been revised upwards for regions like Latin America, Oceania, and the Eurozone.
• Favorable consumer sentiment: Indicators such as the US Purchasing Managers' Index (PMI) suggest a more optimistic outlook going into 2025 compared to previous years.

This growth in demand is evident across all trade lanes, with notable year-on-year increases in imports to Oceania (9%), Latin America (8%), and Europe (6%). Strong exports from Asia, especially ahead of the Chinese New Year holiday in January 2025, further contribute to this trend.

Tight supply amid new capacity additions

While demand remains robust, supply-side constraints continue to impact freight costs:

• Fleet expansion: The global container fleet grew by approximately 10% in 2024, bringing the total capacity to 31 million TEUs. However, new deliveries scheduled for 2025 will only add 7% to the existing fleet. The idle fleet of container ships was less than 1% at the end of 2024, an all-time low.
• Congestion challenges: Port congestion can strain supply chains and push up freight costs. Port congestion has worsened, and is currently at a three-month high. Key hubs in Asia, Europe, and the Americas reporting delays. UK and German ports are experiencing greater congestion than usual. Deviations via the Cape of Good Hope have also absorbed 8-10% of available capacity.
• Regulatory pressures: Upcoming International Maritime Organization (IMO) and Emissions Trading System (ETS) regulations will require carriers to reduce greenhouse gas emissions, further limiting effective capacity. The share of emissions that carriers must surrender under the ETS regulations has increased to 70% from January 2025. Further surcharges are also expected this year.
• Alliances changes: Shifting alliances are expected to cause disruption, with knock-on impacts on freight costs in the short term. East-West trade lanes are expected to see the greatest impact.

As a result, actual capacity growth remains minimal, with no significant gains anticipated in early 2025.

Operational disruptions on the horizon

The outlook for the competitive shipping industry in 2025 is uncertain. The global shipping industry faces additional challenges that could influence freight costs:

• Labor unrest and automation negotiations: The expiration of existing contracts and stalled negotiations around port automation could lead to port closures and increased congestion. The tentative agreement made in early 2025 has ended the threat of the ILA port worker strike. This means predicted disruption of transpacific and transatlantic shipping, and higher freight costs, has been avoided.
• Geopolitical shifts: Potential tariffs and policy changes with the new US administration may disrupt trade flows. It’s difficult to predict exactly what this could mean for the shipping industry and freight costs.
• Climate events: Adverse weather conditions and other disruptions continue to affect schedule reliability, and are becoming more common. The shipping industry is strongly impacted by severe weather conditions, especially maritime shipping. For example, the grounding of the Ever Given in 2021 which blocked the Suez Canal was partly due to high winds. Rough seas can also increase the risk of damage to cargo.

Stay up to day by checking our port updates, for the latest news on port disruptions that could affect your shipments.

Ocean freight costs and market dynamics

Freight rates remain relatively high compared to the previous year, driven by strong demand and operational uncertainties:

• Firm rates for exports from Asia: Rates have increased since October 2024, particularly for shipments ahead of the Chinese New Year and potential US port strikes.
• Competitive pressures: With additional capacity deployed after February, competition among carriers is likely to intensify, potentially softening rates in the longer term.
• Transatlantic rates: despite the rush on cargo space ahead of potential new tarrifs, transpacific rates have declined slightly, while transatlantic rates remain steady.

Looking ahead

As the industry adapts to new regulations, operational challenges, and shifting market dynamics, freight costs will remain a key focus for importers and exporters alike. The competitive landscape is expected to evolve, with alliances and service innovations shaping capacity and pricing trends. New alliances between large carriers, such as between MSC and Maersk, as well as other changes, could cause disruption in the short term, but may ultimately decrease freight costs through increased competition.

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Reviewed by Hillebrand Gori