Market situation – Compass – May '25

Market/Trade Information

Asia

• With the postponing of the increased U.S. tariffs, cargo is being rushed from China to the U.S., which is creating a peak season with high rates on the Transpacific trade as a result. Currently cargo leaving China, bound for the U.S., will carry a 30% tariff, a reduction from the 145% which was in place for six weeks. In return, China has lowered its tariffs on U.S. goods from 125% to 10%. The news of the postponing in combination with the current scheduled blank sailing create an environment in which rates are rising significantly.

• When comparing the average SFCI, spot ocean freight rates out of Asia to Africa are the most lucrative of all markets in terms of income per nautical mile. (Knowing this, we refer to the customer letter of Feb’25 wherein we informed you about this switch of capacity by MSC. At that time no clear strategy was given by MSC on the move. So, can this be considered a lucky guess or ‘progressive insight’?).

• From Asia to Northern Europe several carriers have increased their rates or have announced a GRI starting in June.

Europe/ Mediterranean / Black Sea

• The U.K. government has decided to suspend tariffs on 89 product categories (everyday essentials such as pasta, fruit juices and plastics) so they can be imported duty-free until July 2027. The U.K. government has also decided to expand export financing by 20 billion pounds, granting access to loans of up to 2 million pounds to support SMEs with their international exports.

• Congestion in the European terminals remains. Beginning of May, Antwerp reported a yard utilization of 96% and reefer plugs were overloaded (at 112%). Bremerhaven in Germany is facing similar problems. Rotterdam and the U.K. ports are also heavily congested. Shipping lines are desperately looking for any escape and are executing many vessel diversions from one port to another to reach a port which is the least impacted at that given moment. This is not structural relief but just passing on the hot potato; they will probably have to divert again probably the week after. The congestion is only expected to get resolved when all alliance network adjustments kick in and volumes settle down. Current congestion in the EU ports is ramping up to 6 days or more.

• On May 21^st, the Swedish Transport Union announced a blockade. Dockworkers laid down their work between 12 noon and 6:00 p.m. A full strike from May 22^nd to May 26^th followed, and another next strike from May 30^th to June 15^th is ongoing. The blockade will generate significant disruptions in transit times when shipping from and to Sweden.

• For cargo departing from Turkey with a destination in the USA, rates have increased significantly, with amounts ranging around 500-600 USD per TEU. The main reason, as is often in this case, is limited capacity which is driving the rates up.

• On May 1^st, the Mediterranean Sea became the world’s fifth emission control area (ECA), regulating air pollution from merchant vessels in the area. ECA zones are defined by the International Maritime Organization as per the MARPOL convention. The ultimate goal is to reduce sulfur oxide emissions from the maritime industry. Because of the more expensive fuel (containing max 0.1% of SOx content), or the retrofitting needed to comply when burning VLSFO, shipping lines have announced surcharges for all shipments entering, departing, or transiting via the Mediterranean.

North and Central America

•   The Trump administration’s trade stance toward the world continues to oscillate between hardline and hesitant. One moment, penalties are imposed on carriers calling with Chinese-built ships; the next, tariffs on Chinese or European goods are hiked, then postponed, then reintroduced — sometimes all within the same month. Most recently the U.S. Court of International Trade said the president has overstepped his authority in imposing his reciprocal tariffs, making the viability of these tariffs very uncertain. For companies and people, this unpredictability is more than a headline - it is a daily operational challenge. Planning becomes a balancing act between reacting to policy shifts and maintaining supply chain resilience. In this climate, certainty is the rarest commodity of all. The uncertainty creates surges in cargo volumes and rate levels. One week, shipping lines are cancelling capacity with void sailings, and the week after they are shifting additional vessels and containers to the trades calling at the U.S. to accommodate cargo rushes prior to the implementation of (yet again) postponed tariffs.

• The regulation on U.S. port fees targeting Chinese vessels has been revised. Both the affected vessels and the amounts have been reconsidered. Only 7% of the container ships calling at the U.S. ports will be affected, with Chinese carriers OOCL and COSCO being most impacted. Chinese vessels smaller than 4,000 TEU or on voyages shorter than 2,000 nautical miles will be exempted from any fee.

Latin America

• During the months of March to May, a lot of products are harvested. This puts pressure on the market, mainly for refrigerated and reliable services as well as on the existing (port) infrastructure for exports out of Latin America.

• There is a shift in shipment volumes coming from Asia (mainly China) to Brazil and Mexico. Most likely China is looking for other markets to avoid the tariffs when shipping to the U.S. The increase in volumes has resulted in a steep increase in spot pricing.

• The food and beverage industry in Latin America is facing uncertain times with the U.S. tariffs greatly impacting the cargo flows between these countries and the United States. Exporters in Colombia who might face 25% tariffs when shipping to the U.S. are looking to develop intra-regional trade or even business into Asia. Intra-regional trade in the food and beverage sector in Latin America accounts for 22% of all trade, whereas trade to Asia accounts for 45%. Local market experts indicate the most growth opportunity for Mexico and Colombia.

Red Sea and Gulf area

• The U.S tariff policy also has an impact on the MEA region. Larger ships, originally transferred from the U.S. to the Middle East routes, are being transferred back to the U.S. trade to cover for peak volumes prior to the actual application of the high(er) tariffs. This is causing an overall short supply of space and capacity on the routes departing from MEA. Limited space and equipment are resulting in rising freight rates for June.

• CMA CGM will return to the Suez route on the Med Express service from June to connect Abu Dhabi, Jebel Ali, Karachi, Mundra, Nhava Sheva, Colombo and Jeddah with the following Medports: Piraeus, Malta, Genoa, Fos, Barcelona, and Valencia. With this move, CMA CGM is the first mainline carrier to make a firm return to the Suez Canal.

• The port of Hodeidah in Yemen, which acts as an alternative to the port of Aden, has been almost fully destroyed by an Israeli attack and will not be serviced until further notice.

• Spokespersons for the Yemeni-based Houthi militia have informed several governments and other authorities they will no longer target commercial vessels transiting the Red Sea, unless they are Israeli owned or operated. The Suez Canal Authority (SCA) seeks to lure back large container ships with special offers after the U.S.-Houthi ceasefire. The SCA has announced a temporary 15% cut to the transit fees charged on large container ships to encourage them to start using the waterway again. For the shipping lines, this ‘incentive’ would be used to offset the higher insurance costs they are facing. The carriers however remain very reluctant to return to the Suez passageway.

Indian Subcontinent

• Following a terrorist attack on April 22^nd, India launched strikes on Pakistan on May 7^th. The conflict lasted for four days, and it was the most serious military crisis in decades between the two rival countries. Given brief concerns about a possible attack on Karachi port, some carriers suspended their calls to the port. In the meantime, the suspension has been lifted. Karachi port however was already struggling to cope with congestion in the terminals due to an accumulation of containers following a transport strike. The strike was initiated by the Karachi Goods Carrier Association (KGCA) and the Transporters of Goods Association (TGA) because of an enforcement of new safety regulations, including tracking devices, cameras, and safety grills on vehicles, costing up to 300,000 PKR (approx. 1062 USD) per unit. The transporters are requesting a grace period of 3-6 months in order to bring their fleets into compliance.

General information

• Drewry published an article on May 1^st stating that the ‘Outlook for container shipping is more uncertain than during Covid’. Mounting geopolitical tensions and erratic U.S. trade policy are creating a chaotic climate for the maritime sector. “The difference now is that then the world quickly got to grips with the risks that COVID presented and once it was fully understood, we were able to plot a recovery in a remarkably short space of time,” explained Simon Heaney, Senior Manager of Container Research at Drewry. He added that this time around there is an absence of a coherent trade strategy which has left everyone guessing. “Any predictions that we make for the container shipping market – or any market for that matter – have an extremely short shelf life” he said. “I’d say we’re in coin-flip territory as we await what happens during the 90-day pause of the reciprocal tariffs that will end in early July”. Emphasizing the words of Heaney, this was before the U.S. court ruled that the President has overstepped his authority with the tariffs. Heaney estimates that the region ‘North America’ (the U.S., Canada and Mexico) will see a drop in container volumes by 5.5% this year, followed by a further 4.6% drop in 2026.

• The International Monetary Fund (IMF) downgraded the U.S. GDP forecast. The IMF reduced the forecast to 1.8%, which is a sharp decrease from the original 2.7% which was projected in January 2025. The global outlook also got revised down to 2.8% from 3.3%.

• Schedule reliability is on the rise. In April, global container shipping schedule reliability improved by 1.7% bringing the market average to 58.7% which is the highest recorded level since November 2023. (Throughout 2024, schedule reliability was between 50 and 55%).

• According to Linerlytica, port congestion takes 8% of container capacity hostage. (Linerlytica is a company that provides data-driven market intelligence for the container shipping industry). On average 2.56m TEU is blocked due to port congestion which obviously has a big impact on available capacity on the market.   

These trends give the market changes on the spot market compared to 1 year ago, 3 months ago or 1 month ago.