The analytics firm Xeneta has conducted research on the prospects for long-term container shipping contracts in 2025, highlighting that uncertainty and instability will persist throughout the year. The possibility of a truce in the Middle East has raised hopes for a large-scale return of container ships to the Red Sea. Such a scenario could lead to a collapse in freight rates due to increased market capacity resulting from the resumption of transit through the Suez Canal and record deliveries of new vessels.
However, most cargo ships continue to navigate around the Cape of Good Hope, and there is no certainty that the situation will change in 2025. With average spot rates still up by 142% from the Far East to the US East Coast, 100% to Northern Europe, and 135% to the Mediterranean, the dilemma for shipowners and shippers remains complex in determining the "right" price for long-term contracts.
Analysing long-term contracts in effect from 1 January 2025 compared to those that came into force a year earlier, Xeneta observes an increase in rates on seven of the nine major global routes under observation. Focusing on transport from the Far East to Europe and the United States, long-term rates to Northern Europe have risen by 57% compared to the previous year. As for connections to the US East and West coasts, the increases are 44% and 64%, respectively. However, analysts note that these rates remain significantly lower than current average spot rates.
Xeneta adds that while the increase in long-term rates compared to 2024 represents a compromise between shipowners and shippers, a deeper analysis of the data reveals more complex negotiation dynamics. Shipowners, concerned about the risk of a rate collapse if there is a widespread return to the Red Sea, seek to secure long-term agreements to reduce uncertainty and protect their market share. On the other hand, shippers fear being locked into high rates and prefer to maintain flexibility to take advantage of potential future reductions.
One of the most interesting aspects of the analysis concerns the differences in rates based on contract duration. For transport from the Far East to Northern Europe, shipowners have granted discounts of up to 28% for contracts lasting more than six months. For the US East and West coasts, the discounts have been 13% and 2%, respectively. It should be noted that in the US market, the bidding season is not yet fully underway, and these figures may change. This dynamic highlights the delicate balance between sellers and buyers of maritime transport: shipowners encourage longer contracts to stabilise revenue, while shippers seek to maintain room for manoeuvre to react to market fluctuations.
Data collected by Xeneta clearly shows that both shipowners and shippers enter negotiations with full awareness of their market position. Some shippers prefer to lock in rates for more than six months to safeguard their supply chains and avoid further negotiations in the event of new global crises. Others, however, choose to take risks, hoping to secure lower rates in the coming months and facing new bidding rounds. Xeneta concludes that the outcome of negotiations will depend on the risk appetite of the parties involved. However, entering negotiations without a detailed knowledge of the market means exposing oneself to unfavourable conditions.
