Excess leads to freight falling

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★Demand prospects reverting weak
With rates cutting advances in 2025, normalization of saving behaviors is expected to appear as rates reduction, and the consumption trend will gradually converge towards disposable income. However, trade tension will increase the uncertainty of the economy, and concerns about the future will be the main constraint on the recovery of consumption. With demand advanced and restocking exhausted, demand on Europe service lack of support.
★Oversupply despite uncertainties
The first uncertainty is the timing of resumption in the Red Sea. The impact of rerouting has largely been mitigated, and new ship deliveries will drive supply towards excess. The second uncertainty is the shipping alliance reorganization. The third uncertainty is the potential pressure from a tariff-driven rush to transport and strikes at US East Coast ports, with a possibility of spilling over to Europe routes. The fourth uncertainty is disturbance from ports.
★Freight keeps falling
Surplus may emerge in Europe service, leading to a downward shift in freight. The march of oversupply mainly depends on the pace of new ship deliveries. Seasonality will still be reflected in freight rates. MSC’s share in Europe routes rising will exacerbate the fluctuations in freight. If the Red Sea resumes, supply pressure will surge immediately and seasonality will no longer be significant. Freight will start to trend downward steadily, eventually reaching cost levels and then fluctuating.
★Risk Warning
The resumption in the Red Sea, the prolonged strike at US, and European consumption exceeding or falling short of expectations, etc.