The year 2024 was marked by disruptions in the Red Sea, which salvaged the financial results of shipping companies while hampering environmental efforts. Here’s a review of 2024 in 10 key points.
The year 2024 initially appeared grim for shipping companies. In their early budget projections, they anticipated a sharp decline in financial performance, as the Asia-Europe freight rate market fell below four digits in October 2023. However, a geopolitical event drastically altered the situation. Following the attacks carried out by Hamas on October 7, 2023, Israel launched a strong counteroffensive. Weeks later, on November 17, 2023, Houthi rebels from Yemen made a dramatic move by capturing the car carrier Galaxy Leader, claiming to act « in solidarity » with Hamas. This incident marked the beginning of a dramatic market turnaround.
The Houthi rebels’ attacks on commercial ships escalated in the Red Sea, prompting shipping companies, particularly in the containerized maritime sector, to reroute their vessels around the Cape of Good Hope. This situation was neither anticipated nor desired by the companies but had a lifesaving effect on their financial recovery after an overall gloomy 2023. It is evident that, three years after the Covid pandemic, a dramatic event once again created exogenous market tensions that benefited carriers. The results of ONE (Ocean Network Express), whose fiscal year runs from April 1 to March 31, are a striking example. While the Japanese company had initially faced a 2023–2024 fiscal year in the red, it ultimately turned a profit thanks to the strong rebound in freight rates during the first quarter of 2024.
It is worth noting, however, that during this period, the operating costs of shipping companies soared.
1. A Smooth Integration of New Capacity
The almost systemic and forced rerouting of container ships via the Cape of Good Hope—a route that has once again revealed the challenges of winter navigation—proved to be an unexpected stroke of luck for shipping companies. This development came at the perfect time to cushion the arrival of new capacities ordered during the post-Covid euphoria.
In summary, 2024 saw a demand increase of around +7%, while capacity grew by 3%, factoring in the extended routes. Meanwhile, 2024 recorded one of the lowest rates of ship scrapping in recent history.
2. Freight Rates Exceed Expectations
The transpacific trade remained a balanced, active, and profitable market throughout 2024, providing an unexpected boost to shipping companies at the end of the year. While freight rates had shown signs of weakening in the final quarter on this route—following record-breaking performances by U.S. West Coast ports—the announcement of additional tariffs by the incoming Trump administration prompted a surge in early orders. This helped mitigate the erosion of freight rates toward year-end.
The Asia-Europe trade tells a different story. Filling mega-container ships remained a persistent challenge as European demand stayed sluggish throughout the year. The usual Golden Week rebound failed to materialize, and no spike in restocking orders was observed due to generally comfortable inventory levels. The weak demand was also reflected in the financial struggles of several European retail players.
The extended routes generated sufficient market tension to keep freight rates relatively high for most of the year. However, a decline in rates was observed starting in September as rerouting via the Cape of Good Hope became a new norm incorporated into logistics strategies, and demand remained soft. A short-lived rebound was recorded at the year’s end.
3. Environmental Efforts Take a Back Seat
2024 was supposed to be a landmark year for emissions control, with measurable progress expected due to increased use of greener fuels and the inclusion of maritime transport in the European Union’s Emissions Trading System (ETS) from January 1, 2024. However, instead of improvement, the average carbon footprint of a 40-foot container on the Asia-Europe route worsened by 20–40% compared to 2023, primarily due to longer routes.
This development is an absolute paradox at a time when climate issues have shifted from political to societal concerns, with individuals increasingly aware of their effects. It also presents an economic challenge, as climate-related disasters continue to cause damages worth billions.
Source: upply
