Commentary Trading Places

By Peter Tirschwell

Fundamentals are deteriorating, but demand for tonnage remains robust.

An odd disconnect has taken hold in container shipping that defies easy explanation but points to possible tectonic shifts in the global market.

Fundamentals are deteriorating, but demand for tonnage remains robust. Carrier profits rapidly disappear as volume growth dwindles, freight rates fall and order book reaches an all-time high equating nearly 30 % of the existing fleet. And yet, charter rates and secondhand ship prices are rising, and carriers are not idling or scrapping vessels.

“ The reason is there is still a shortage of tonnage on the high seas,” a senior carrier executive told the Journal of Commerce.

The executive, who asked not to be identified, and his peers say the diversification of containerized trade routes— accelerated by US tariffs— is driving strong demand for tonnage, especially smaller ships which have not been growing like larger vessels.

A“ global restructuring of trade routes” is underway, according to Jon Monroe, a veteran carrier, non-vessel-operating common carrier and technology executive who consults for forwarders.“ Despite the insane capacity increase from new vessel introductions, carriers are keeping their charter vessels to service new growth markets,” he said.“ China is pivoting to Central America, South America, Southeast Asia and of course Africa. And services are moving from direct, to hub-and-spoke networks requiring feeders for transshipments.”

Maersk CEO Vincent Clerc made a similar point about China on the company’ s Aug. 7 earnings call.

“ I think the fabric of global trade is changing,” Clerc said.“ If you just look at the numbers, what we’ ve seen in the last two and a half years is an acceleration of globalization on the back of huge commercial success from Chinese companies that are taking market share on the global stage.”

Others point to growing importance of regional trade lanes amid sourcing diversification and geopolitical factors, as well as growth in non-US trade lanes, given that imposition of high tariffs is unique to the US. That has led to greater demand for smaller vessels able to call more diverse ports.

One Asia-based ocean carrier source described it as a“ structure supply situation,” noting a shortage of ships above 3,000 TEUs, which are in demand on several trades. In smaller vessel segments, fewer ships are available to meet the demand, keeping charter rates elevated.

“ While spot rates have come under pressure, charter rates and secondhand vessel values remain firm— largely due to extended routing, geopolitical disruptions and the need for flexible tonnage,” said Aditi Rasquinha, CEO Greater China for DHL Global Forwarding.“ Larger vessels dominate main trades, intensifying competition, while smaller ships remain in demand for regional and diversionary services. This has delayed scrapping and kept idle fleet levels low.”

The idle fleet, currently at just 0.5 %, is hovering near all-time lows, according to an Aug. 19 Alphaliner report.“ With such minimal idling, the sector is considered‘ fully employed,’” the analyst wrote.

At the current capacity scrapping pace— less than 4,000 TEUs in the first half of 2025— this year will see the lowest annual total of TEUs sent to the scrapyard in two decades, Alphaliner said.

Charter rates, meanwhile, are very strong. The Harpex container ship charter index, from shipbroker Harper Peterson, nearly tripled since the start of 2024. The average price for a five-yearold container ship grew 17 % year over year and 6 % since the start of 2025, according to BIMCO.

Industry fundamentals, however, go in the opposite direction. Average global container spot rates have tumbled 60 % since August 2024, according to the Drewry World Container Index( WCI).

At the same time, carrier profits are plummeting, and analysts say the worst may be to come. In the second quarter of 2025, carriers collectively generated $ 4.4 billion in net income, down from $ 9.9 billion in the first quarter and $ 12 billion in the same three-month period last year, according to analyst John McCown.

JP Morgan expects carriers to experience“ deep losses” come 2026.“ We continue to see an industry that is suffering from material oversupply,” the investment bank said in an advisory.

Some believe deeper forces explain the disconnect between sinking industry fundamentals and a fully deployed fleet— the idea that when carriers look beyond the current cycle, they see market forces working in their favor in the long term.

“ The industry’ s profitability profile has shifted,” said Johnson Leung, partner at Linerlytica and a former financial analyst.“ Peak freight rates in the current cycle are much higher than in the previous one, while the troughs remain at similar levels. This dynamic gives liners more hope to bet on the cycle beyond this near-term slump.

“ And the whole industry is in a net cash position, which puts pressure on the management to deploy capital [ because ] net cash is not optimal for generating financial returns,” he added.“ It makes more sense for them to reinvest in their core business rather than in areas where they have less expertise.”

email: peter. tirschwell @ spglobal. com

70 Journal of Commerce | October 6, 2025 www. joc. com