The ocean sector has entered turbulent seas once again with major storm clouds looming ahead. Geopolitical tensions ranging from the Red Sea attacks and the war in Ukraine to the U.S. tariffs being used to achieve foreign policy objectives are intensifying global economic instability, shipping disruptions, and cost increases.
“Following the recent bombing of the Houthis’ facilities in Yemen by the U.S. military and the launch of missiles against Israel and a U.S. warship, the consensus view in the industry now is that the Red Sea crisis will not be resolved soon and will continue into late 2025 or into 2026,” says Philip Damas, managing director and head of Drewry Supply Chain Advisors.
Stefan Verberckmoes, senior analyst at Alphaliner, concurs: “The industry is not looking for any short-term solution. The shifting of routes back to the Red Sea any time soon would create chaos and safety risks. Carriers would have to redesign their networks, and they just went through this with alliance changes.”
Consequently, nearly all the ocean carriers continue to divert ships around Africa instead of using the Suez Canal shortcut. “These diversions mask the ‘latent over-capacity’ of the container shipping industry and keeps freight rates higher than they would be otherwise,” says Damas.
Consultants say tariffs remain a key factor shaping freight rates. While long-term contract rates on trade lanes from China and the Far East to the U.S. have been trending down, they remain well above pre–Red Sea crisis levels.
Tensions and tariffs equal instability
Meanwhile, industry experts are reluctant to comment on any specific impacts the U.S. tariffs may have on volume and shipping lanes since President Trump continually makes changes.
Conflicting information makes it difficult for shippers to make sound decisions. In some cases, shippers are importing goods quickly to stockpile volumes before the tariffs go into full effect. Others are canceling or decreasing bookings to the U.S. “Shipments decreased immediately after the tariff announcements,” adds Verberckmoes.
A report from Descartes states that in March 2025, U.S. container imports continued to perform well, increasing 6.3% over February and 11% year-over-year. March’s total of nearly 2.4 billion TEUs marked the third-highest volume ever recorded for the month, trailing only March 2022 and March 2021. Researchers there, however, indicate that the growth came in the face of increasingly volatile global conditions, including the escalation of U.S. tariff policy against key trade partners.
During a web event held by Xenetra, chief analyst Peter Sand commented on how shippers and forwarders are signing contracts at lower levels compared to the peak in third quarter of 2024.
Meanwhile, rates have increased in Europe, Central and Southeast Asia, Latin America (west coast), and Southern Africa, reports Container xChange, an online marketplace for shipping containers. Prices have generally declined across North America, the Middle East and Indian Subcontinent, Northeast Asia, and East Africa.
In Drewry’s opinion, President Trump’s tariffs will cause a decline in shipping demand, and subsequently freight rates as well as a rise in rates for all products carried on China-built ships. This will be an effect of planned U.S. cost penalties on China-built ships—and on carriers that that have ordered ships from China.
“We will need to calculate the net effect on freight rates,” says Damas, who noted in April that spot freight rates remain high, but supply in shipping is now growing faster than demand. This is pushing spot container freight rates back down consistently since the beginning of the year. “If the Red Sea conflict ended, freight rates would fall even faster,” he says.
Various associations representing U.S. exporters and importers have asked the U.S. Trade Representative (USTR) not to implement the proposed penalties on China-built ships calling at U.S. ports, saying that this would lead to harmful consequences for U.S. businesses and consumers.
“There will be renewed rate volatility in shipping and many operational changes, as shipping networks adapt to the new regulatory environment, making it difficult for exporters and importers to manage their international supply chains,” says Damas says.
Verberckmoes notes that most experts have found that 55% of ships calling on the United States were built in South Korea—24% were built in China.
Cargo ship shortages and casualties
A major issue affecting the industry is the fact that it’s still short of ships.
“The charter market is very strong,” says Verberckmoes. “This is a difficult situation for ocean carriers because they have to charter ships at very high rates, particularly at a time when their income is down.”
Already one carrier, Vasi Shipping, has felt the impact and declared bankruptcy as of April 10, 2025. This example highlights a growing concern in the industry—falling freight rates versus rising charter costs.
Verberckmoes also points to changes that are occurring in routings. “S Line is withdrawing from its Pacific routes and choosing to focus its operations on intra-Asian trade lanes,” he says.
Alphaliner reports that MSC, which has redirected some of its 19,000 TEU to 24,000 TEU mega vessels from its Asia-North Europe trade route to West Africa and the Mediterranean. Two MSC ships are calling on the Port of Lome in Togo. Smaller ships (around 14,700 TEUs) are being used to serve the Asia-North Europe corridor.
Meanwhile, congested seaport conditions and labor strikes are resulting in chaos in major European ports while key U.S. Pacific seaports brace for major decreases in traffic due to the Trump tariffs.
Port of Los Angeles executive director Gene Seroka said in a statement: “If my projection is correct, we will see at least a 10% drop in cargo volume in the second half of the year.” He adds how big companies that conduct business through the Port of Los Angeles have been frontloading or advancing inventories for the past several months as they expected Trump to issue tariffs.
Verberckmoes describes a situation where, in late April, one ship sailing from China to North Europe stopped at Zeebrugge and two other seaports before it was able to offload its cargo. Sources reporting to the London Sunday Times commented on how some ships on Asia, Europe, U.S. routings are now offloading their U.S. bound cargo in Europe to avoid the Trump tariffs.
Some carriers are also choosing to deploy ships on other, more profitable routes given falling capacity to the U.S., fluctuating market demands, and declining rates in North Europe. “Already, MSC is doing a lot of traffic from the Baltics [Lithuania] to Saudi Arabia’s Port of King Abula, then onward to India,” says Verberckmoes.
In August 2024, MSC introduced a new standalone service, Clanga, as part of its continued commitment to providing an expansive network of direct port pair connectivity to mitigate challenges of port congestion in the Middle East.
“This service provides competitive transit times for Asia to Middle East cargoes and boosts trade connectivity between China, Singapore and Saudi Arabia via a call in Ad-Dammam,” says MSC. “Furthermore, Clanga offers a unique and competitive service for Saudi exports to the Far East through its direct call in Shanghai from Ad-Dammam.”
Given Trump’s volatile treatment of tariffs, Verberckmoes foresees more changes on the horizon. “Essentially, the United States will be served by small vessels from other hubs, perhaps through the Caribbean,” he adds.
Takeaways for ocean shippers
Given so much noise, shippers face increasing uncertainty in their decision making. “And there’s a risk that the availability of carrier services at minor ports will decline due to the USTR penalties on China-built ships calling at U.S. ports,” stresses Damas.
Exporters and importers can’t control external and regulatory changes. However, Damas notes they can work on de-risking their 2026 plans after reviewing where they can possibly divert and diversify sourcing once the new tariffs are confirmed and considered “permanent.”
Damas also suggests studying the logistics of new sourcing locations and hiring more tariff experts. He recommends assessing the potential reduction of freight rates from lower volume growth; the potential increase of freight rates from U.S. penalties on China-built ships; and the potential reduction of U.S. port coverage by carriers.
“Exporters and importers have a lot more work ahead of them to address all these mainly negative disruptions and changes,” Damas says.
Ocean carriers turn to technology for growth, competitiveness
Despite the current volatile environment, some ocean container lines are taking a long view to ensure their future growth and competitiveness. One area is the upgrading of equipment with new technologies.
“Some ocean carriers have made big advances by introducing ‘smart containers,’ that use Internet of Things [IoT] technology,” says Philip Damas, managing director, head of Drewry Supply Chain Advisors.
Here sensors transmit real-time data, such as the container’s location, temperature, humidity, and other key cargo parameters. Communication protocols send this data to a secure cloud-based platform that uses machine learning-based algorithms to detect important events and manage processes. Users can then access various information, such as asset data through web-based applications.
Smart containers offer visibility and control. They provide visibility of the status, location and condition of goods and containers as well as the ability to streamline operations. They can impact sustainability goals; satisfy customer expectations by providing accurate and timely delivery; and provide the ability to trace shipments.
They can also assist in shipment patterns to help improve routes, inventories, maintenance schedules, and long-term cost effectiveness. “IoT technology now provides better monitoring of products inside the shipping containers from origin to final destination,” says Damas.
Damas further points out that some carriers and software companies are working on predictive analytics to help decide when to repair refrigerated containers.
According to a Drewry research, 25% of containers worldwide are set to be equipped with some sort of IoT device by 2026, opening the door for further innovation. Some shipping companies are already transforming themselves to take advantage of IoT shipping. They include CMA CGM, Hapag Lloyd, ONE, Evergreen, Zim, and Yang Ming.
“Many companies are experimenting with AI, but this technology has not delivered gains in productivity in shipping just yet.,” says Damas says. “Automation has taken a back step, with the agreement signed earlier this year between the ILA union and port employers, which aims to protect dockworkers’ jobs and limit automation in container ports.”
