Significant Capacity Expansion on Major East-West Trade Routes

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Mfame Editor
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  • Container freight rates dropped sharply after the Chinese New Year of 2025 due to aggressive pricing strategies, supply- demand imbalances, and new alliance adjustments.

  • Capacity surged on key routes, with Asia-European capacity increasing by 27% year over year post-CNY, while Transpacific routes showed mixed trends.

  • The success of planned April General Rate Increases (GRIs) depends on reducing capacity through blank sailings, but only MSC has announced such measures so far.

Container freight rates usually weaken after CNY due to seasonal factors. However, in 2025, the decline has been sharper than expected, suggesting additional factors such as aggressive pricing strategies among shipping lines, adjustments due to new alliances, and shifts in the supply- demand balance.

Supply-Side Trends and Capacity Growth

While demand data for February is unavailable, supply-side figures from the Trade Capacity Outlook database reveal key trends. Examining capacity changes for the eight weeks before and after the lowest departure week during CNY provides insights into market conditions:

  • Asia to North America West Coast (NAWC): Capacity rose by 7% Y/Y before CNY and surged by 14% Y/Y afterward.

  • Asia to North America East Coast (NAEC): A mild contraction of 3% Y/Y before CNY and 4% Y/Y after CNY.

  • Asia-Europe: Capacity grew by 9% Y/Y before CNY, followed by a substantial 27% Y/Y increase after CNY.

Impact of Capacity Growth on Spot Rates

The rapid capacity expansion on the Asia- Europe trade lane is a major factor behind the sharp drop in spot rates. Meanwhile, spot rates on the NAWC route declined later, in line with the delayed capacity injection compared to Europe.

Challenges for General Rate Increases (GRIs)

Shipping lines have announced GRIs for April, aiming to stabilize rates. However, achieving these increases requires cutting available capacity through blank sailings. While MSC has taken steps to reduce supply on certain Transpacific routes, other carriers have not yet followed suit, leaving the success of these price adjustments uncertain.

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Source: Sea-Intelligence