Cargo volumes are expected to grow more slowly than the fleet, at 3-4% in both 2024 and 2025 vs. fleet growth of 9.5% in 2024 and 4.9% in 2025.

However, the ship supply/demand balance is still expected to strengthen in 2024 as Houthi attacks on ships in the Red Sea force ships to take longer routes via the Cape of Good Hope. We have assumed that this will impact the market during the first half of 2024, with routings returning to normal via the Suez Canal after that.

As this temporary increase in demand for ships is not related to cargo volume growth, it follows that ship demand will fall in 2025.

The tightening of the supply/demand balance has immediately led to an increase in freight rates, time charter rates and time charter fixture periods. 

Despite a slight fall after the Chinese New Year, average freight rates for containers loading in China are currently 52% higher than they were in December 2023. We doubt whether freight rates will increase in line with cargo volumes strengthening in the second quarter, as the fleet is growing faster. Once the Red Sea crisis has been resolved, freight rates should begin to fall in line with the weakening of the supply/demand balance.

Time charter rates have increased 41% since December 2023 and average fixture periods have increased by 3 months. The rates could stay high for a while as liner operators look to secure sufficient tonnage to maintain services despite the longer sailing distances. 

So far, second-hand prices have only increased marginally despite an increase in time charter rates normally being reflected in those prices. We believe that this will continue to be the case, as liner operators can look forward to significant excess capacity once the crisis in the Red Sea has been resolved. That is because they prefer to cover increased demand by taking on time charter tonnage rather than buying second-hand tonnage.

According to the International Monetary Fund’s (IMF) estimates, the global economy should grow 3.1% in 2024 and 3.2% in 2025, slightly higher than the 3.0% estimated for 2023.

China is forecast to continue to suffer from its ongoing real estate sector crisis, seeing growth slow from 5.2% in 2023 to 4.6% in 2024 and to 4.1% in 2025. This will also drag growth in the entire East & Southeast Asia region below the 2023 level in both 2024 and 2025.

A recovery in growth in the eurozone from 0.5% in 2023 to 0.9% in 2024 and 1.7% in 2025 is forecast to help lift growth in the Europe & Mediterranean region higher than 2023 in both 2024 and 2025.

Growth in the US is predicted to fall from 2.5% in 2023 to 2.1% in 2024 and 1.7% in 2025. Mexico is also forecast to see weaker growth, and faster growth in Canada will not be sufficient to avoid growth in North America coming in lower than it did in 2023 in both 2024 and 2025.

Although India is still expected to be the fastest growing major economy, growth is still expected to fall from 6.7% in 2023 to 6.5% in both 2024 and 2025. Still, the Indian Subcontinent & Middle East region will see faster growth in 2024 and 2025 than in 2023, as Saudi Arabia is expected to rebound from its 2023 recession caused by lower oil production.

Despite growth in Brazil being expected to weaken compared to 2023, the South & Central American region is still forecast to grow faster in 2024 and 2025 as Argentina emerges from recession.

Elsewhere, faster growth is expected in Sub-Saharan Africa, whereas growth is forecast to slow in Oceania in 2024 but rebound in 2025.

The OECD’s Composite Leading Indicator (CLI) meanwhile points to future growth higher than the long-term trend for both China and for G20 countries. Though growth conditions appear to have been improving for the major four European economies as well as the North American economies, the CLI indicator remains below 100 and indicates growth slower than the long-term trend – also in the near-term. 

Consumer confidence in the EU and US has meanwhile continued to improve and support retail sales, although it remains below pre-pandemic 2019 levels. 

The Purchasing Managers’ Index (PMI) for manufacturing meanwhile remains stable at around 50 for the world and for China, indicating neither positive nor negative growth. In addition, the PMI for new export orders in China hovers around the 50 mark. However, the PMI in the eurozone has remained below 50 since September 2022, which points to continuing contraction of the sector.

Currently, the attacks on merchant ships in the Red Sea resulting in ships choosing routes via the Cape of Good Hope instead of the Suez Canal, are much more significant than trade and economic developments.

Because almost all container ships have stopped using the Suez Canal, demand for ships has increased by about 10%. As we cannot predict how long this situation will last, we have decided to work on an assumption that this impact will be limited to the first half of 2024.