Asia-Europe

Sources anticipate the additional rerouting costs in the region will force other ocean carriers to follow suit on similar surcharges.

The freeing up of vessel capacity that has been diverted around southern Africa for the past 18 months could inject as much as 2 million TEUs of functional capacity into the global container shipping market.

The restrictions have “effectively” made direct vessel calls to either Karachi or Port Qasim on India services operationally impossible, according to major container lines.

While ongoing port congestion in North Europe and longer voyages around the Cape of Good Hope will help to absorb incoming vessels, it will also leave the trade lane open to volatile shifts in capacity that cannot be planned for, a Journal of Commerce webinar was told.

A range of factors including full yards, labor unrest and carrier network changes are making it difficult for the hubs to clear container bottlenecks.

The carrier and competitor Hapag-Lloyd announced strong financial results Wednesday, but both said the success of early 2025 won’t be replicated through the balance of the year given market headwinds linked to the global trade conflict.

But executives at both northern range hubs highlighted the extreme volatility of the first three months and the US tariff-driven uncertainty that lies ahead.

With the door to US trade effectively slammed shut by tariffs, Chinese manufacturers are urgently looking for alternative markets in which to offload their surplus inventory.

First-quarter carrier earnings are likely to be buoyed by high rates and strong demand that has spilled over from 2024, but tariffs, slowing volume and excess capacity are darkening the outlook for the rest of the year.

A full evaluation of on-time performance will not be possible until July once the transition to the new deep-sea services has been completed, but data for February and March is positive for the Maersk/Hapag-Lloyd alliance.

The parent company of Cosco Shipping and OOCL expects a 72% increase in first-quarter net profits, but the rapidly escalating trade war between the US and China is clouding its outlook for the rest of the year.

While strong volume and congestion at both ends of the trade lane are filling the available capacity, the canceled sailings suggest carriers expect demand to falter.

There is a seasonal element to the second quarter increase in capacity deployed on the trade, but the reluctance by ocean carriers to withdraw capacity comes amid increasing signs of a price war.

Cosco said changes in the shipping alliances this year will trigger competition in digitization and decarbonization.

Despite banking a collective operating profit of about $60 billion in 2024, a worsening supply-demand imbalance could make the next three years difficult for the container shipping industry.

The Cosco Shipping subsidiary recorded another highly profitable year but pointed to growing geopolitical uncertainties and industry-specific challenges that will test container shipping in the year ahead.

The threat underscores the fragility of the Red Sea security situation and the reluctance of ocean carriers to return to Suez Canal transits until the safety of crew, ships and cargo can be guaranteed. 

Analyst Lars Jensen’s closing message to conference participants planning their supply chains for the coming year is to move slowly and carefully because it will take months before clarity emerges.

The bleak timeline from Europe’s busiest port is based on the chaos that resulted when the Ever Given was freed after six days of blocking the Suez Canal in 2021.

While the new network will need two cycles to be fully phased in through the next two or three months, the Hapag-Lloyd CEO said Gemini was “off to a good start” with 550 port calls made so far and 45 of 57 services already started.

The measures are the latest in a series of support packages announced by South Korean trade organizations and government bodies to help the country’s small and medium-sized exporters weather capacity restrictions and volatile freight rates.

The carrier has replaced the huge vessels with smaller ships in a move to cut capacity and reduce pressure on rates that have plummeted since the start of the year, according to the analyst.

The poor operating conditions look set to continue this year, likely keeping container handling numbers under pressure at Europe’s third-largest port.

A dispute over severance pay compensation has resulted in a series of walkouts by dockworkers at Rotterdam’s Delta II terminal over the past month, severely disrupting the handling of deep-sea vessels, regional feeder ship calls and inland-bound cargo.

The threat dynamic in the Houthi-controlled area remains too high for ocean carriers to consider ending diversions around southern Africa, and higher insurance costs likely await when they do.

Spot rates on the eastbound corridor are fast converging on long-term prices, and carriers want to lock in cargo owners ahead of a return to Red Sea transits and the resulting capacity overhang.

Full ships from China are arriving as labor action roils container handling at major hubs in Rotterdam and throughout France, with the disruption exacerbated by bad weather.

The disruption to the Asia-Europe trade lane is expected to be limited as the transition from old services to the new alliances is being made during the traditionally slow post-Lunar New Year period.

Ports in the UK are already seeing rising operational delays as a string of storms moves in from the Atlantic and major ports in Europe issue high wind warnings.

China celebrates the Year of the Snake Tuesday, and while there is always a move to get export orders on the water before the holidays, the push this year came earlier than expected.

With voyages around southern Africa taking up to 45 days and most carriers continuing to divert away from the Red Sea, the shorter route cuts the transit time of Kawa Shipping’s China-Europe Express to just 26 days.

A pledge by Houthi militants to focus ship attacks on Israel-linked vessels is not enough to encourage ocean carriers to end their diversions around Africa and return to transits via the Suez Canal.

The peace deal in Gaza is highlighting the capacity overhang facing container shipping once vessels absorbed by the longer voyages around southern Africa return to the shorter route via the Red Sea and Suez.

The carrier said its ability to capture market share was directly linked to a shift in trade dynamics as mainline operators outsourced intra-regional services to more agile operators.

The carrier’s top-line financials are a clear signal that container shipping is firmly back in profitable territory following a poor end to 2023 that left several carriers nursing losses.

With the threat of a US port strike averted, the transition to new global service networks will not be accompanied by widespread disruption, the analyst believes.

With shippers under pressure to finalize production plans with Asian factories amid ongoing vessel diversions around Africa and elevated rates, there is little point in delaying the signing of annual contracts.

Carriers adopting a “wait-and-see” approach to the new regulation will face significant penalties and a potential loss of income from decarbonization-focused customers, according to a report from the classification society.

Shanghai and Ningbo are dealing with “serious” congestion, according to a forwarder, while labor shortages in Hamburg are causing berthing delays of up to 10 days.

Despite a glut of capacity on the water, Suez Canal diversions and healthy volumes will keep container shipping vessel supply tight, analysts predict.