Shipping volatility to continue into 2025 – Drewry

THE PAST few years have been a whirlwind of disruptions, delays, and fluctuating freight rates for shippers, and it seems these challenges are far from over. According to global leader in maritime research and advisory services, Drewry Shipping Consultants, 2025 will mark the fifth consecutive year of high volatility in container shipping rates, continuing a trend that has left the industry grappling with uncertainty.

Over the past four years, ocean freight rates have experienced turbulent swings, with the most significant price fluctuations recorded since 2021. Drewry’s data reveals that in 2023, average freight rates on major East-West routes saw a drop of about 60 per cent. However, the relief was short-lived, as rates are projected to have risen by approximately 20 per cent in 2024, reflecting market instability. The consultancy’s forecast for 2025 indicates that despite the addition of substantial new vessel capacity, ocean contract rates on routes to the US will likely rise, with spot rates expected to dip in the latter half of the year. This unpredictability in pricing, compounded by ongoing capacity shortages, continues to create a challenging environment for those involved in the global supply chain.

The volatility is not limited to just spot rates, which are typically used for smaller shipments or excess volumes by large carriers. Since 2020, shippers in the spot market have felt the effects of extreme fluctuations in freight costs. But even for contract rates, which were seen as more stable, price swings have been significant. Drewry notes that the standard deviations in average contract rates have increased more than tenfold since 2021. What’s more, this year, shippers have had to contend with new challenges such as peak season surcharges and Red Sea surcharges, which have been imposed due to capacity shortages, particularly on the busy Asian routes.

For shippers wondering how they can manage the ongoing volatility and uncertainty, the answer lies in adapting to a new normal in the shipping industry – one that is marked by constant flux. Drewry suggests shippers must be prepared for a continuation of disruptions and should prioritise resilience in their supply chain strategies.

One of the key strategies is active vendor management. As carriers and third-party logistics providers continue to face pressures from supply and demand imbalances, shippers must carefully vet their partners and remain agile in their approach. This means being proactive about negotiating contracts and surcharges and being prepared to respond quickly when disruptions occur. Shippers who can stay ahead of the curve in terms of rate forecasting and cost management will be in the best position to weather the storm.

In addition to vendor management, another critical strategy is improving risk management, particularly in the context of geopolitical uncertainty. Some shippers are already taking the step of having teams monitor geopolitical risks and assess how these could affect their supply chains. This approach is becoming increasingly important in a market where unforeseen events can lead to sudden and severe disruptions, Drewry shared, adding that shippers can also benefit from leveraging data and insights to improve their forecasting and decision-making processes and better anticipate potential market shifts.