Freight Market Insights
Ocean shipping is a crucial component of global trade ensuring the smooth and effective movement of goods from manufacturers to consumers. By volume, about 90% of goods traded globally are shipped by sea, with most of those goods by value, sailing in containers. Keep reading for this month’s ocean and air update, or stay up to date on a weekly basis with our weekly update available here.
Ocean Rates Recover Even in Late-Year Lull
October featured rising trade war tensions between the US and China, including mid-month reciprocal roll outs of port call fees for US and Chinese vessel arrivals at Chinese and US ports, respectively, and a Trump threat of 100% tariffs on China starting November 1st.
But following a much anticipated end of month Trump-Xi his meeting, President Trump announced that the US will reduce fentanyl-related tariffs on China from 20% to 10%, extend the reciprocal tariff pause for a year and postpone USTR port call fees, with China also postponing its port fees and agreeing to other concessions.
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This deescalation puts US tariffs on China back to March levels. These moves may be unlikely to spur a sudden surge in transpac freight demand, but do mean that supply chain stakeholders have more certainty and stability regarding the tariff landscape than at any point so far in 2025.
Trump also announced trade deals with Malaysia and Cambodia late in October while establishing frameworks with Vietnam and Thailand, generally featuring 20% US tariff baselines with various exemptions in exchange for reduced barriers to US exports and investment/purchase commitments, likewise leading to a firmer tariff landscape than earlier in the year.
Despite soft post-peak season demand leading rates to slump to year-lows by mid-October, East-West container rates rebounded mid-month on GRI gains, supported by significant blanked sailings.
Transpacific rates to the West Coast increased 40% in the last two weeks of October to $2,000/FEU, 16% to the East Coast to $3,500/FEU, with Asia-Europe prices climbing 30% to close the month at $2,270/FEU.
Rates on these lanes rebounded to mid-September levels and now exceed October 2023 prices after dropping to about pre-Red Sea crisis levels mid-month, with carriers potentially introducing additional GRIs for November.
Even with these rate gains however, prices remain 40% to 60% lower than a year ago. Red Sea diversions absorbing capacity were credited as the main driver of highly elevated rates last year. That rates are falling even while Red Sea diversions continue points to capacity growth as an important factor for current rate levels
Air Rates Climbing, Despite Peak Season Skepticism
China – US Freightos Air Index air cargo rates climbed 10% in the last two weeks of October to $5.64/kg – their highest sustained level since March – possibly driven by Trump’s Nov. 1st 100% tariff threat. Some experts are skeptical there will be much of an air peak season this year due to trade war frontloading and impacts on e-commerce volumes. But if climbing rates do signal the start of the seasonal rush, it is muted compared to a year ago when prices were already at about $7.00/kg. South East Asia – N. America rates have climbed 3% in the last few weeks to $5.14/kg. Transatlantic rates have increased 9% to $1.85/kg, their highest level since June.
China – Europe prices are up 7% over the last month to about the $4.00/kg level and on par with last year despite reports of significant year on year volume increases on this lane, while SEA-Europe rates are up 13% to $3.55/kg. Climbing rates may indicate the start of peak season demand on these lanes, but rates on par with last year despite volume growth may reflect that capacity is shifting to where the volumes are too.
Understanding the Freight Market & Trends
Multiple factors can impact operations and rates in the container shipping market.
Increases in consumer demand for goods leads to increased demand for ocean freight and can put pressure on operations and lead to higher prices as space on vessels fills up.
Examples of drivers of increased demand include typical seasonal increases like those that occur most years during the ocean peak season from about July to October to build inventory for shopping events from back-to-school through the holiday season.
But demand can also be driven by geopolitical factors like trade wars that push shippers to increase orders before new tariffs go into effect, or unique events like the pandemic that drove consumers to shift spending from services to goods as they were stuck at home.
An increase in demand and container traffic can often lead to congestion at ports, which also tends to delay vessels and reduce effective supply in the market. Congestion for other reasons – like bad weather, labor strikes that create backlogs, or unusual events like the blockage of the Suez Canal in 2021 or the Red Sea diversions in 2024 – can also lead to backlogs and congestion.
Together, increases in demand or port congestion (and the two often occur together) put upward pressure on freight rates until demand declines and/or congestion eases. Ocean carriers will increase rates by announcing General Rate Increases (GRIs) for prices on a given lane, or adding to the existing base rate through different surcharges like a Peak Season Surcharge or Port Congestion Fee.
When demand for shipping decreases, freight rates generally drop as well. Again, demand can decrease seasonally during the non-peak months of the year, or can be driven by macroeconomic factors like recession or inflation.
Carriers will try to nonetheless keep vessels reasonably full and freight rates at profitable levels by reducing capacity through decreasing the number of vessels they operate by canceling, or “blanking” scheduled sailings. Downward pressure on rates can also happen if the global fleet has grown through the building of new vessels but more quickly than demand has expanded.
The container market is considered quite a volatile one, and plenty of examples even from the last few years demonstrate that unexpected changes in demand, spikes in port congestion, or geopolitical events can disrupt operations or send freight rates spiking.
This volatility makes staying on top of trends in the market all the more important to logistics stakeholders committed to making informed decisions and creating strategies for supply chain resiliency even in times of disruptions.
Key Factors Affecting the Freight Market
As noted, multiple factors can impact the container freight market by driving changes in the supply of available capacity or demand for container shipping. These include:
Seasonal demand increases from July to October in advance of consumer events and in the lead up to the Lunar New Year holiday in China – usually in February – as shippers pull forward a few weeks of demand before manufacturing pauses over the holiday break.
Increases/decreases in consumer spending linked to general economic growth or recession or by unforeseen factors like the boost to consumer spending on goods during the pandemic.
Geopolitics can change freight dynamics too. Trade wars that result in tariffs can lead to a rush of importing activity before the tariff is rolled out. Blockages of waterways, like in the Red Sea, can also impact freight costs by causing the market to adapt.
Port congestion reduces the available supply of container capacity as vessels wait for a spot to open at a port. Congestion can be caused by bad weather, labor strikes, or even just a big enough increase in demand and traffic that can cause a backlog at ports.
Fleet growth – Ocean carriers need to determine in advance how many new vessels to order and sometimes the growth of the fleet can outpace the growth in demand. When this happens, carriers face downward pressure on rates as the market is oversupplied.
The volatility of the international freight market makes staying on top of trends in the market all the more important.
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