Insights

The great ocean freight shakeup: What lies ahead?

Jonathan Colehower, Managing Director, Global Supply Chain Management, UST

The ocean freight market outlook for 2025 reflects ongoing volatility and increasing challenges, requiring businesses to rethink their strategies. Over the last few years, ocean freight rates have been volatile, with costs skyrocketing during the post-COVID surge—from $2,000 to over $10,000 per voyage. While costs temporarily stabilized in 2022, geopolitical conflicts in the Red Sea region triggered another spike, with rates reaching $4,000 per container.

This blog highlights key ocean freight challenges, explores trends impacting rates, and delivers actionable solutions to help businesses successfully navigate the shifting tides of global shipping in 2025.

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Ongoing disruptions and impact on planning

The Suez Canal, which typically handles 12% of global trade, remains a significant obstacle. Projections indicate that normal operations through this critical route will not resume until 2025. Some regional carriers still use the Suez Canal, but others use the cross-trade route through the Cape of Good Hope (COGH), which adds up to two weeks of lead time.

The ability to reduce costs while ensuring reliability will depend on adopting strategic approaches, such as:

• Leveraging technology to improve ocean freight efficiency.
• Understanding how to choose an ocean freight carrier that offers flexibility and reliability.
• Using data to negotiate rates more effectively.

Companies that adopt ocean freight solutions focused on planning, supply chain optimization, and cost management will have a significant advantage.

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Current trends

Capacity growth and supply challenges

S&P Global estimates that shipping carriers will expand capacity by 9% in 2025, outpacing the projected 3% growth in cargo volume. BIMCO offers an even starker forecast, predicting a 16% increase in capacity against a more modest 4-5% rise in cargo volume. The backlog of new ships is now at its highest point in a decade, signaling increased space availability. Major carriers are aggressively growing their capacities. However, this growth is occurring alongside ongoing disruptions, including vessel diversions around the C H. In 2024, blank sailings—cancellations of scheduled voyages—remained high at 15-20%, reducing schedule reliability.

Demand outlook and market imbalance

While capacity continues to expand, demand growth remains modest. Global demand for ocean freight is expected to increase by only 3% in 2025, creating a significant imbalance. Shippers should adopt strategies to negotiate ocean freight rates and improve cost efficiency during high-demand periods.

In North America, import demand has surged by 10% annually since 2019, reflecting sustained growth in regional trade. However, new potential U.S. tariffs on Chinese goods could further drive up costs, adding pr sure to supply chains.

Geopolitical tensions and alliances

Due to the disruption caused by geopolitical tensions, ocean carriers are reconfiguring alliances, which will shift the organization of container shipping. Changes in alliances can impact transit times, capacity availability, and the choice of an ocean freight carrier that best meets business needs.

Environmental regulations and decarbonization

Carriers are under mounting pressure to comply with global decarbonization goals, which could drive operational costs and influence ocean freight rates. Adopting sustainable practices and monitoring ocean freight regulations and compliance will be critical for shippers looking to stay ahead in a rapidly evolving market.

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Key implications for businesses

Downward pressure on ocean freight rates

One of the latest trends is the downward pressure on rates caused by rising capacity and weakening demand. For businesses, this creates an opportunity to reduce ocean freight costs and introduces uncertainty for long-term planning.

For example, consider a large retailer shipping 8,000 containers per month at $3,000 per container:

• Annual cost: $288 million
• By reducing rates to $2,000 per container, the business can save $100 million annually, directly improving profitability.

This example underscores how strategies focused on rate optimization can deliver substantial financial gains.

Timing is critical: Strategic RFP season.

The annual Request for Proposal (RFP) season for ocean freight logistics—running from January 1 to March 1—is now underway. This period is crucial for businesses looking to negotiate rates and secure contracts that align with long-term goals. To maximize savings, they must explore flexible contract terms considering market volatility.

Reevaluating long-term agreements

Traditional annual contracts may no longer offer the best value in today's unpredictable market. Companies should reevaluate their strategies and consider alternatives, such as

• Spot markets: Provide greater flexibility in securing competitive ocean freight rates.
• Short-term contracts: Allow businesses to adapt quickly to shifts in industry trends.

By diversifying their approach, organizations can optimize supply chains and mitigate risks caused by trade tensions, tariffs, and fluctuating demand.

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How UST supports your business goals

UST offers tailored ocean freight solutions to help businesses address these challenges and seize opportunities amid the shifting market conditions.

Strategic RFP management

With UST's extensive market presence and expertise, businesses can negotiate ocean freight rates more effectively. Our advisory services are designed to help you create and review RFPs optimized for cost savings and risk mitigation. Leveraging smarter strategies and a data-driven approach ensures contracts deliver value while maintaining flexibility and navigating volatility.

Network optimization for greater efficiency

Balancing costs and risks is critical. UST's simulation models evaluate logistics networks, providing actionable insights to redesign operations and improve efficiency.

Our comprehensive studies, completed within 12–16 weeks, deliver clear, actionable recommendations to streamline logistics and minimize costs.

Adopting advanced technology: UST Omni

UST Omni, our AI-driven platform, provides real-time visibility into complex transportation scenarios, empowering businesses to make smarter decisions.

• Start small: Focus on high-priority regions like Southeast Asia to gain initial insights.
• Scale up: Gradually expand the implementation to achieve network-wide efficiencies.

With UST Omni, businesses can improve ocean freight efficiency and enhance decision-making.

Looking ahead: Preparing for 2025 and beyond.

The ocean freight industry will evolve with changing dynamics, including the expansion of capacity, demand fluctuations, and trade bastions. With UST, businesses can navigate these challenges confidently, ensuring long-term resilience and sustainable growth in an ever-changing market.