- Shipping companies are reducing capacity on East Asia–U.S. routes in response to falling freight rates and weakening cargo demand, reversing earlier expansions made after tariff delays between the U.S. and China.
- U.S. container import volumes have declined for two consecutive months, while freight rates from Shanghai to the U.S. West Coast have plunged by over 60% since June.
- Korean carriers like HMM and SM Line, heavily reliant on transpacific trade, are expected to see significant drops in revenue and profit due to the weak market outlook.
Global shipping companies are scaling back their capacity on routes from East Asia to the United States due to a significant drop in transportation demand. Earlier this year, demand surged temporarily following the decision by the U.S. and China to postpone high tariffs under the Geneva agreement in May. However, the recent weakening of demand has led to declining freight rates, prompting shipping firms to readjust their planned supply, according to Chosunbiz.
Planned TEU Capacity Drops Sharply
According to Sea-Intelligence, a Danish maritime analysis firm, total scheduled shipping capacity on Asia–U.S. routes for next month stands at 360,000 TEU (twenty-foot equivalent units) as of the 18th, reflecting a 5% decline from the 380,000 TEU planned on June 13. For this month, planned capacity also dropped from 400,000 TEU to 370,000 TEU—a sharp 8% reduction in just a few weeks. This shift reveals that shipping companies had initially anticipated continued demand growth but are now responding quickly to market corrections.
U.S. Import Volumes Fall for Second Month
Supporting the adjustment, actual container import volumes into the U.S. are falling. According to U.S. trade data firm Descartes, total U.S. container imports in the previous month were recorded at 2,217,675 TEU, marking a 3.5% decline year-on-year. After an increase of 9.1% in April to 2.41 million TEU, imports have declined consecutively for two months, signaling a slowdown in consumer demand and economic activity.
Freight Rates Plummet Across Key Routes
Freight rates have also seen steep declines. As of the 25th, the rate for shipping one 40-foot container (FEU) from Shanghai to the U.S. West Coast fell to $2,067, a 3.5% decrease from the previous week. This marks a dramatic 63% drop from the $5,606 rate seen in June, erasing much of the profitability carriers enjoyed earlier in the year.
Uncertainty Over Tariff Policy Clouds Outlook
The Korea Ocean Business Corporation (KOBC) has attributed much of the market volatility to ongoing uncertainty in U.S. trade policy, particularly those carried over from former President Donald Trump’s administration. KOBC stated that “cargo demand headed to the U.S. has decreased due to unclear tariff policy,” and added that a further year-on-year decrease in shipment volume is likely in the second half of the year if tariff rates continue to climb.
Korean Shipping Firms Face Profit Pressures
The downturn in freight rates is expected to hit Korean shipping companies like HMM and SM Line particularly hard, as both carriers rely heavily on transpacific trade lanes. HMM, for example, generated 40% of its revenue from American routes last year. Analysts now predict a sharp contraction in profitability. According to Shinhan Investment Corp., HMM’s total revenue is forecast at 10.472 trillion won, down 10.5% from the previous year, with operating profit expected to plummet by over 50% to 1.749 trillion won.
South Korean shipping firms, once buoyed by high rates and surging demand, are now bracing for a period of contraction as the global trade environment cools and market uncertainties persist.
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Source: Chosunbiz
