- Global shipping costs are projected to stay elevated next year, driven by geopolitical and economic disruptions.
- US tariff threats are causing China to pivot trade flows towards Europe, Southeast Asia, and other markets.
- Geopolitical issues in the Red Sea are increasing transit times, straining shipping capacity, and raising insurance premiums for shipping companies.
Global shipping faces sustained challenges, with rising freight rates forecast for 2025 due to geopolitical tensions, tariff threats from the US, and disruptions in key shipping routes like the Red Sea. Industry experts discussed these pressing issues at the Asian Maritime Law and Business Conference in Kuala Lumpur, reports New Straits Times.
Freight Costs and Geopolitical Influences
Rising global freight rates are set to persist, driven by economic and geopolitical factors. John Lim, Managing Director of CMA CGM (Taiwan) Ltd, highlighted the impact of US President-elect Donald Trump’s aggressive tariff policies on global trade. With tariffs on imports from China, Canada, and Mexico, the US is causing significant shifts in trade flows.
Lim explained that China, facing an overcapacity issue, is seeking alternative markets. “If they cannot ship as much to the US, they will turn to Europe, Southeast Asia, and Latin America. That’s why you’re seeing a lot of movements in trade flows,” he noted.
US retailers are also likely to preemptively stockpile inventories, exacerbating logistical bottlenecks and intensifying freight demand.
Red Sea Crisis and Shipping Disruptions
The geopolitical instability in the Red Sea has disrupted maritime trade routes. With some vessels bypassing the Suez Canal and opting for the longer Cape of Good Hope route, container capacity is under significant strain.
This rerouting adds up to four weeks of additional transit time per voyage, reducing operational capacity. Lim noted that attacks in the Red Sea region have cut container traffic by approximately 1.2 million TEUs and caused congestion in major ports across Asia and Europe.
Insurance Premiums and Crew Challenges
Higher risk in maritime zones has escalated insurance costs. Captain Subhangshu Dutt, Executive Director of OM Maritime Pte Ltd, explained that premiums rise sharply following attacks. Additionally, ship crews working in high-threat areas negotiate higher wages, increasing operating expenses.
“At the height of these threats, operating a small ship in such conditions could cost up to a quarter-million US dollars,” Dutt revealed. Shipping companies are also incurring additional costs for training and replacing unwilling crew members.
Implications for Global Trade
The combination of these challenges—tariff-induced trade shifts, route disruptions, and increased costs—threatens to strain the global shipping network further.
Transit times between Asia and the Mediterranean have already increased by 39%, adding pressure on an already fragile supply chain.
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Source: New Straits Times
