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A market in a lower gear

New data reveals that growth in the first two months of 2024 aligns with the figures from the end of 2023, while the detour around Africa and increased CO2 emissions pose additional challenges and potential cost increases in the shipping industry.

The market data for February 2024 is now available, allowing us to analyze the figures for January and February together. This is essential because the Chinese New Year does not fall on the same date every year, and combining the months allows for a more accurate comparison over the years.

In 2024, January and February saw a growth in global container shipping volumes of +10.7% compared to last year. This seems impressive, but when we compare 2024 with 2019, before the pandemic, the growth is only 8.1% over five years. This translates to an average annual growth of only 1.6%, which is in line with the growth rate of the last four months of 2023. In short, the growth is not particularly strong.

Increase in Ship Numbers Causes Minimal Downward Pressure

A key question is how the detour around Africa affects demand. This can be measured in TEU*Miles globally. The growth amounts to 33% compared to last year but only 27% compared to 2019, which equates to an average annual growth of 5%. This growth largely corresponds to the increase in the size of the container fleet.

However, this means that as more ships are delivered in 2024, there will be slight downward pressure on freight rates unless shipping volumes increase. This aligns with the already observed downward pressure on spot rates, especially on the main routes from Asia in recent months, although these are still significantly higher than before the Red Sea crisis.

Consequences of Increased CO2 Emissions May Lead to Additional Taxes

The detour around Africa increases CO2 emissions for routes to and from the EU. Shipping companies must report this and pay taxes under the new ETS rules, which means higher costs for shippers. Major global shipping companies have been sailing via South Africa for 16 weeks now, increasing EU-related emissions by 8% for 2024. If the Red Sea crisis continues until the end of 2024, CO2 emissions could increase by up to 28%. Even an 8% increase will bring container shipping emissions back to 2019 levels, negating the reductions of the past five years.

This development could have significant political implications in the EU. Although shipping companies have no choice but to sail via South Africa due to the Houthi presence in the Red Sea, the political focus could shift to the rising CO2 emissions. This could lead to increased CO2 taxes or other mechanisms, in addition to the already agreed-upon measures.

Importers and exporters in the EU should already be thinking about how their supply chains will be affected by additional CO2 charges on shipping from 2025 or 2026, in addition to the already known increases.

Improvement in Punctuality as a Sign of Stabilization

The punctuality of container ships worldwide improved marginally by 3% in February compared to January. Although actual punctuality is still low, this small improvement indicates that the new routes via South Africa are beginning to stabilize. Further improvements in punctuality can be expected in the coming months, albeit with longer planned transit times.

Since Maersk and Hapag-Lloyd announced their new Gemini network from 2025, the Ocean Alliance and THE Alliance have also announced their networks for 2024 and 2025. A significant change is that the major transshipment port in Hong Kong is almost entirely bypassed as a direct call on nearly all major routes.

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