According to Bloomberg Intelligence, President-elect Donald Trump’s planned policy mix, which includes higher tariffs, may reduce demand for container shipping services in 2025.
Container shipping’s order book accounts for 18 per cent of the global fleet, which is almost two times larger than pre-pandemic levels, as reported German carrier Hapag-Lloyd.
This might be attributed to the industry’s increased profitability during the pandemic, as shipping corporations leveraged cash flow to put orders for larger and more cost-effective ships.
A new containership takes 2-3 years to build on average, which might result in significant deliveries during the following year. This may put pressure on freight rates and industrial profitability in 2025.
Stephane Kovatchev, Credit analyst at Bloomberg Intelligence, said: “The rise in container-shipping freight rates this year can be largely explained by Houthi rebel attacks on vessels in the Red Sea. This has supported the profitability of container shipping companies such as Maersk and Hapag-Lloyd.
“A possible re-stocking of inventories in the US, ahead of rising tariffs, could increase demand for shipping services and support industry profitability in the near term. Outside of geopolitical risks, industry overcapacity, weaker consumer demand and high inventory levels, which led to softer trends in 2023, remain key risks for the sector in 2025.”
Inflation and restrictive monetary policies might lead to lower consumer demand for container shipping services in 2025, continues Bloomberg Intelligence.
The University of Michigan’s consumer-sentiment index fell to an all-time low in 2022, owing mostly to inflationary fears, and it remains below pre-pandemic levels.
Data supplied by the European Commission depict a similar picture, which may be worsened by geopolitical dangers in Eastern Europe.
READ: Maritime industry suffers from increasing trade imbalances
Weaker freight rates and softer volume, due to new ship deliveries and macroeconomic uncertainty, could be key reasons for a decline of profitability at Maersk in 2025, particularly if tensions in the Middle East de-escalate.
The Danish shipping company may record a cash burn of about $1 billion next year, Bloomberg consensus suggests. This could represent an important turnaround from the record $27 billion free cash flow achieved in 2022.
During his first term in office, Donald Trump levied extra tariffs of up to 25 per cent on billions of items imported from China.
Using data on customs levies collected by the US government, Bloomberg Intelligence calculates that the average tariff rate on all items imported into the US has increased from just over 1.5 per cent before to the trade war with China to approximately 3 per cent on average over the previous five years.
READ: Carriers’ low rates fail to gain shippers’ loyalty
Stephane Kovatchev added: “Trump has floated various tariff proposals while on the campaign trail – mentioning 10 per cent or 20 per cent universal tariff rates on all goods imported into the US and a higher rate of 60 per cent on goods from China.
“Whether these tariffs would actually be imposed or used as a bargaining chip is not clear, but if they are, these pledges point to a much more broad-based rise than that observed in his first term. This could take US average tariffs to rates not seen since the 1940s.”
