Despite growing signs of ocean freight overcapacity, container rates on Asia – Europe lanes have maintained their increases from recent GRIs.
Asia – Mediterranean rates were level last week at $3,342/FEU after climbing 15% to start the month for its fourth consecutive successful GRI since mid-October, before which prices dipped to a year low of about $2,000/FEU.
Asia – N. Europe prices were stable last week at $2,449/FEU, and level with rates set in early November, but still well above its mid-October nadir of $1,700/FEU. For most of the last two months rates on these lanes have climbed bi-monthly via capacity reductions as demand eased. But carriers and forwarders are now reporting an uptick in demand as some shippers are getting an early start to pre-Lunar New Year ordering – a trend also seen in Asia – Europe rate behavior in 2023 and 2024 when December prices climbed sharply, possibly in response to Red Sea-driven longer lead times.
Carriers are now increasing capacity to meet demand, with some planning mid-month Asia – Europe and Mediterranean GRIs to the $4,200/FEU and $4,750/FEU levels respectively. Through October, year to date Asia – Europe volumes were up 8.6% according to CTS. December demand is likely stronger than last year as well, with some speculating that some shippers are expecting a return to the Red Sea soon and are therefore building inventory buffers now in expectation of disruptions. But even with both Red Sea diversions still in place and volume growth, spot rates have consistently been lower than last year. Current Asia – N. Europe rates are down 54% compared to last December, pointing to capacity growth as an important factor to current price levels.
On the transpacific meanwhile, even with capacity reductions – and additional blanked sailings announced for the coming weeks – carriers are having difficulty getting the series of recent GRIs to stick. Last week West Coast rates retreated 6% from a start of the month GRI bump, to $1,963/FEU. Prices to the East Coast increased 8% to $3,150/FEU this week, but are down 15% from a month ago. Even with these ups and downs, though, carriers have succeeded in keeping rates above October lows of $1,400/FEU and $3,000/FEU respectively, likely with benefits of higher rates for short periods in between the dips.
Slumping Q4 demand, in addition to growing fleets, is an important factor to rate levels, making planned mid-month GRIsunlikely to hold, and a more sustained rate rebound more likely only as we get closer to LNY. There are some indications that part of current demand levels is due to some US manufacturers pausing imports in the hopes that a Supreme Court decision invalidating IEEPA tariffs will come soon and result in lowered duties. Though the White House maintains that if IEEPA is struck down, it is ready to quickly restore tariffs by other means, some speculate that the administration – under growing pressure from cost of living concerns – could use a court decision against them as a tariff off-ramp.
But even with seasonal increases in demand in 2026 – and following an estimated 1.4% decline for 2025 year total US ocean imports – S&P projects year totals in 2026 will fall 2% before a 6% rebound in 2027.
And slumping demand next year will coincide with capacity that will continue to grow. Though most of the new vessels are large and used on the main east-west trades, these new deliveries are also having knock-on effects on secondary lanes, like regional and feeder markets. As these new large vessels are introduced, older large vessels are being shifted to secondary lanes increasing capacity on these lanes, but also leading to an aging smaller-vessel fleet, which could set up a shortage of right-sized ships for these lanes even as total capacity grows.
Capacity levels will be even higher once Red Sea diversions end. But regardless of when carriers feel ready to resume traffic through the Suez, vessels won’t be able to return until vessel and cargo insurers also agree that the risk of attack has dropped sufficiently. Some experts suggest insurers will need at least another 60-90 days of quiet before considering a Red Sea return.
In other geopolitical developments, Mexico announced significant upcoming tariffs on many goods from countries with which they do not have trade agreements, including China. This step would be a blow to China, as Chinese exports to and investment in Mexico have grown sharply over the last few years. But despite this year’s trade war, China has shown export growth driven by diversification of trade partners.
In air cargo too, global volumes have grown from trade diversification even as changes to de minimis rules in N. America – including Mexico – have meant fewer e-commerce volumes entering those markets by air.
But even on the transpacific, air demand has rebounded, if not fully recovered from the de minimis cancellations, both from some e-commerce recovery but also from significant general cargo growth from Vietnam as well as from China. IATA estimates that – after sharp e-commerce-driven 11% growth in 2024 – 2025 global air volumes will be 3.1% stronger than last year and that in 2026 demand will grow by 2.6%.
As air peak season enters its final week Freightos Air Index China-US rates climbed to a year high of more than $8.00/kg, stretching past last year’s $7.30/kg peak, with South East Asia – US prices up to $5.50/kg from $5.00/kg in October. China – Europe rates dipped to $3.50/kg last week as capacity, following the fast growth in volumes, has shifted to this lane.
Judah Levine, Head of Research, Freightos Group (Nasdaq: CRGO)
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