Back to Previous Page
Container freight rates have posed challenges for highly trade-exposed countries like Vietnam, driving up logistics costs and squeezing profitability. However, since mid-2024, rates have corrected sharply, bringing relief to businesses. The World Container Index (WCI) has dropped nearly 60% from its peak, while the Shanghai Containerized Freight Index (SCFI) has fallen 57% from its July 2024 high. With a trade-to-GDP ratio of approximately 175%, Vietnam stands to benefit as lower shipping costs reduce expenses for both imported raw materials and exported goods, supporting profitability and cost efficiency.
What drove the decline from the 2024 peak?
- Red Sea Disruptions Eased – Initial rerouting due to attacks caused a spike in costs, but carriers quickly adjusted schedules. By late 2024, global supply chains had largely stabilized.
- Weak Trade Demand – Global trade grew only 2.7% in 2024 after a contraction in 2023, with soft U.S. and EU consumer demand weighing on volumes.
- Fleet Expansion Pressures – Deliveries of 3.1 million TEU in 2024 from pandemic-era orders increased capacity and put downward pressure on rates.
We expect freight rates to gradually decline in 2025, returning to pre-COVID levels, driven by two key factors:
Fleet Oversupply Set to Expand – The global container shipping industry is heading into a period of significant fleet expansion. S&P Global projects a 9% increase in container ship capacity in 2025, while BIMCO estimates a sharper 16% growth. These expansions are fueled by a record-high order book of 8.4 million TEU (around 25% of total supply as of 2024), with deliveries scheduled through 2029. This oversupply risks further pressuring freight rates and squeezing industry margins.
Global Trade Remain Sluggish – A sustained surge in global trade demand appears unlikely in the near term. Consumer sentiment remains weak in major economies, with the U.S. Consumer Confidence Index falling to 98.3 in February 2025, down from 105.3 in January, reflecting softer spending appetite. Meanwhile, escalating global trade tensions under Trump 2.0 could further dampen transpacific flows. The WTO projects global merchandise trade volume to grow by just around 3.0% in 2025, a modest rebound that underscores the lack of strong demand momentum
However, Uncertainty Remains Due to Geopolitical Risks – While the frequency of Red Sea attacks has declined since their peak in Q3 2024, regional tensions remain unresolved. A renewed escalation or spillover could again disrupt critical maritime routes—particularly the Suez Canal—posing downside risks to vessel schedules and freight rate stability. We view this as an external, non-forecastable factor. Should such disruptions occur, the downward trend in freight rates driven by fleet oversupply and weak trade demand could be abruptly reversed, leading to a spike in shipping costs.
Source: TIM
