The disruption caused by ships rerouting via the Cape of Good Hope remains a key driver of ship demand. As a result, ship demand is projected to grow three times faster than cargo volumes in 2024. Without this rerouting, ship supply would have outpaced demand, but the supply/demand balance is now expected to be tighter in 2024 than in 2023, reports Bimco.
Container ship market
Ship demand could exceed forecasts in late 2024 and early 2025 if disruptions continue, particularly if negotiations between the International Longshoremen’s Association (ILA) and the United States Maritime Alliance (USMX) fail, leading to potential dockworker strikes in US East and Gulf Coast ports starting October 1.
For 2025, two scenarios are presented: the base scenario assumes ships return safely to Red Sea and Suez Canal routes, while the alternative scenario predicts a continuation of the current rerouting pattern. In both cases, the supply/demand balance would weaken compared to 2024 but would remain stronger than in 2023 under the alternative scenario.
Spot freight rates from Shanghai (SCFI) have declined by more than 30% since July due to lower cargo volumes and increased capacity on certain trade lanes. Average export freight rates from China (CCFI) also saw a 15% decrease. Despite these declines, time charter rates have remained stable as ship availability remains limited, with most vessels renewing or securing new contracts.
As 2025 approaches, further reductions in freight rates and a weakening of time charter rates are expected, particularly if ships return to normal routes. Stable time charter rates have maintained second-hand ship prices, but weaker supply/demand balance could negatively affect time charter rates, impacting ship prices.
The global order book for container ships has increased by 5% over the last three months, driving further price increases for newbuilds. The order books for bulk carriers and crude tankers, however, remain low relative to fleet sizes. Without renewed interest in orders for these ship types, prices could begin to fall.
Recycling prices are currently under pressure from low-priced Chinese steel exports, which could continue unless increased Chinese steel demand reduces exports.
Uncertainty remains, with much of the demand side influenced by current and potential disruptions. While risks to economic growth persist, lower inflation has allowed both the Federal Reserve and the European Central Bank to begin interest rate cuts. The outcome of the November presidential election in the US will further influence trade policies from 2025 onward. If Donald Trump wins, his proposed high import tariffs could disrupt US imports and raise consumer living costs.
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Source: BIMCO
