The More Turbulent the World, the Brighter the Outlook for Container Shipping

Leading global analyst John McCown recently reported that global container volumes have reached record-breaking levels for two consecutive quarters. According to Container Trade Statistics (CTS), third-quarter volumes stood at 47.12 million TEUs, a 1.5% increase from the second quarter's 46.45 million TEUs and a 2.1% rise from the pandemic peak of 46.15 million TEUs in Q1 2021. On a daily basis, this translates to the movement of 523,000 TEUs worldwide. As McCown puts it, if someone asks how large the shipping industry is, the succinct answer is: “Around 500,000 containers are transported daily across the globe.”

These figures highlight 2024 as one of the most remarkable years for the maritime industry. During the pandemic, the surge in demand was fueled by consumer spending on goods over services. Interestingly, no such clear explanation exists for the current growth.

The data also underscores the link between global trade and U.S. trade, which drives much of the global activity. In Q3, U.S. imports saw year-over-year growth of 21.6% in July, 19.5% in August, and 10.9% in September.

Given these dynamics, it's unsurprising that carriers have posted substantial profits. McCown notes that excluding non-disclosing operators like Mediterranean Shipping Company (MSC), the liner industry achieved a collective net profit of $26.8 billion in Q3 2024—a 164% increase from $10.2 billion in Q2 and a staggering 856% jump from $2.8 billion in Q3 2023.

McCown identifies the Red Sea crisis as a pivotal factor. Its impact on global trade—primarily on Asia-Europe routes—has been significant. Prolonged voyages due to route adjustments around the Cape of Good Hope effectively reduced global liner capacity by 8%, pushing up spot rates, especially on transpacific routes experiencing the strongest demand growth.

While rerouting increases costs for Asia-Europe services, transpacific routes have seen the highest profit surges. South Korean carrier HMM led the profitability charts with a net profit margin of 48.9% in Q3, outperforming European liners. McCown attributes such disparities among carriers to differences in customer bases, trade routes, and vessel utilization.

For instance, ZIM President and CEO Eli Glickman highlighted in the Q3 earnings call that ZIM's strategic decision earlier this year to increase exposure to transpacific spot rates drove its robust performance during the quarter.

Despite significant volumes of newbuild deliveries on the horizon, carriers remain undeterred in placing fresh orders. According to Clarksons, the order book currently comprises 750 vessels totaling 7.89 million TEUs, representing 26% of the existing fleet.

This figure, while daunting at face value, hasn't diminished the industry's appetite for new vessels. Major players such as Maersk, MSC, CMA CGM, Hapag-Lloyd, Pacific International Lines (PIL), Evergreen, and Wan Hai continue to place substantial orders, particularly in the context of alliance restructuring.

Meanwhile, demand for medium-sized container vessels remains strong. Carriers are eager to secure these assets well into 2025 and beyond. A notable example is the recent deal involving the 6,612-TEU *Cap Andreas*, where ONE extended its charter for five years at a daily rate of $41,000, starting in Q3 2025.

Global trade's outlook appears more volatile than ever, with “greater uncertainty” as the only certainty. Four critical events in early 2025 are likely to shape the landscape:

- **January 15:** Deadline for ILA-USMX talks

- **January 20:** Inauguration of Donald Trump

- **January 27:** Chinese New Year

- **February 1:** Launch of new shipping alliances

Each of these—whether labor strikes, geopolitical conflicts, supply chain disruptions, or capacity surpluses—has the potential to disrupt the container shipping market.

Nevertheless, as McCown emphasizes, historical trends and recent Q3 results suggest that greater turmoil tends to drive higher shipping demand. Sanctions, regulations, and disruptions often create opportunities for carriers to thrive by addressing clients' pain points.

In summary, the container shipping market has undergone profound changes. Contrary to perceptions, the supply chain hasn't become more fragile; it's now more resilient, thanks to carriers' aggressive investments in new vessels and terminals. However, shippers may need to pay a premium to access this newfound resilience.