Rate Expectations: Detours and Duties Distorting the Market

Market Insight

13 November 2025

10 MIN READ

2 AUTHORS

Since our update in June, the freight market has experienced fewer disruptions than earlier in the year. Recent surges in rates have been carrier-led during tender season, not driven by demand and unlikely to hold. Many indications of recovery in the last six months have been shaped by tariff frontloading and continued vessel rerouting, which distort the underlying market signals. With a wave of new vessels set to enter the global fleet over the coming years, the already subdued market could be subject to further pressure for the foreseeable future.

Market trends

Trade volumes have remained flat from mid-2025 and figures do not indicate an overall increase or decline in global trade. Instead, a shift in trade patterns has become increasingly evident, with exports from Asia to Europe, the Middle East, West Africa and Central America all experiencing growth. Meanwhile, and as expected given the current tariff environment, trade between Asia and North America has declined.

On routes from Asia to Europe, spot rates edged up before the general rate increases of the last couple of months. However, these remain below the long-term average, posing challenges for carriers entering into contract negotiations for 2026.

Following the pre-Golden Week rush to move exports out of China and neighbouring Asian states, coupled with the seasonal dip in volumes after peak season, it is unsurprising that carriers are withdrawing capacity in an attempt to push up spot rates. Yet efforts to lift the market can only go so far, as geopolitical factors beyond carriers’ control continue to sway the overall landscape.

Tariffs and USTR Port Fees

U.S. tariffs announced earlier this year have significantly impacted the North American freight market. Exporters to the US accelerated shipments ahead of the tariffs, which came into effect in early August, driving a short surge in demand. July saw amplified spikes as the usual peak-season uplift was compounded by tariff frontloading to avoid later charges.

In addition, USTR port fees announced earlier this year, targeting Chinese-built, owned, operated, or flagged vessels, came into effect on 14 October 2025. In response, the majority of carriers began reassessing routes and deployment strategies. COSCO and OOCL confirmed their exposure to the charges, reportedly incurring $42.8 million in fees during the first week.¹ Other major carriers, including MSC, Maersk, CMA CGM, and Hapag-Lloyd, were able to redeploy their fleets and reallocate Chinese-built vessels to alternative routes, while deploying others onto US routes, avoiding port fees and surcharges for their customers.

In late October, the U.S. announced a suspension of the USTR port fees, with China also postponing its retaliatory measures, for one year. This unexpected deferral has added yet another layer of unpredictability to an already volatile freight market, and uncertainty is likely to persist for the foreseeable future.

Rates: Spot Rates vs Long-Term Contracts

Spot rates across major trade lanes experienced sharp declines in late September, falling 48% year-on-year and returning to pre-Red Sea crisis levels. This drop followed a weak summer period, during which many carriers blanked sailings and reduced chartered capacity in efforts to stabilise the market.

The Shanghai Containerized Freight Index (SCFI) rose by 7% in late-October, returning to levels last reported in September. This increase was likely driven by planned general rate increases as carriers typically sought to drive up spot rates to strengthen their negotiating position ahead of 2026 tender season. However, the current market environment may make this difficult to sustain and carriers could face resistance from shippers and these increases may not hold.

Analysts have reported difficulty in capturing a true picture of the market as it changes so rapidly. For instance, spot rates on the Asia-US West Coast route had bottomed out at around $1,500 per FEU in early October but quickly rebounded to the $2,200–$2,500 range following China’s retaliatory port fee framework announcement. Xeneta, have reported similar trends in the Asia-Europe market, with Asia-North Europe spot rates climbing by 18% in the month of October to $1,976 per FEU. However, this reportedly remains below long-term averages, further suggesting that these hikes are largely driven by general rate increases rather than genuine market recovery.

These fluctuations over the past six months have built some resistance into the market to fixed rate commitments. There has been a trend for some shippers to opt for index-linked contracts and unless there is some stability in the market, this is likely to remain the case as freight contracts come up for renewal.

Containership orders

At the end of October 2025, it was reported that the proportion of container ships currently on order now represents more than one-third of the total number of ships actively operating in global trade.² This is a level that has not been seen since the Global Financial Crisis in 2008. Surplus capacity is already evident and a release of additional vessels has the potential to further depress the market. As the fleet expands, if demand does not grow in line with increased capacity, freight rates may decline.

Orders are being placed for more efficient vessels with shipowners prioritising alternative fuels when deciding where to invest. BIMCO reported more than 500 alternatively-fuelled container ships were on order at the end of August.³ Although the implementation of IMO Net-Zero regulations has been postponed for a minimum of 12 months, it appears owners and carriers have remained committed to their own decarbonisation targets. Given the long lifespan of these assets, there is a recognition that vessels must be designed to remain compliant and competitive in the evolving, and potentially regional, regulatory and environmental landscape.

Meanwhile, older vessels could incur high fuel compliance costs due to environmental regulations, and surcharges may be introduced to cover such costs. The shift to alternative fuels could also cause volatility in fuel prices as the uptake of alternatives fuels increases if supply fails to keep pace. That being said, the improved efficiency of new vessels is expected to reduce fuel costs over the long term.

Red Sea passage

Despite a reported reduction in threat levels and a ceasefire brokered between Israel and Hamas in early October, shipping activity through the Red Sea remains subdued. Data from Lloyd’s List indicates that transits through the Bab el-Mandeb Strait declined by nearly 5% in September compared to August, with containerships seeing the steepest drop, down 10% month-on-month pre-ceasefire.⁴ Elevated insurance premiums continue to deter carriers, many of whom remain cautious and unwilling to resume passage as they wait for the risk levels to drop and the number of safe transits to increase.

Rerouting around the Cape of Good Hope remains the preferred option for many carriers on Asia-Europe trades. Under such diversions, surplus capacity has been absorbed by increased voyage times and the number of vessels deployed per service. A sudden return to the Suez, combined with the arrival of new containerships currently on order, could cause a sudden release of capacity into the market. This may trigger further long-term rate declines and short-term correction spikes as carriers attempt to remove excess capacity. Overlapping arrivals during the Suez transition, when vessels arrive in Europe from both routes, will cause delays, with port congestion expected to rise. While this could lead to a temporary spike in rates, due to supply-demand imbalances and capacity being delayed at ports, a sustained market strengthening is not anticipated.

Whilst this all remains hypothetical for the time being, large operators such as CMACGM have resumed some Suez transits for its smaller vessels and recently tested the waters with two larger vessels. However, many operators are testing the safety levels on backhaul trade routes only. The overall market sentiment is that regular transits through the Suez in both directions will not fully resume until mid to late-2026, or possibly even 2027. While carriers continue to closely monitor the situation, they will need to prepare for a period of readjustment where schedules are disrupted, and ports congested.

Considerations

It appears that the market continues to be shaped by uncertainty and subject to volatility. Initial hopes that measures such as USTR port fees coming into effect would bring clarity have been undermined by the swift turn of events including the unexpected suspension of those charges.

Carriers remain reluctant to commit to long-term fixed rate contracts, particularly when rates are tied so closely to the shifting geopolitical landscape and subject to such rapid change. Instead, flexibility both in pricing and contractual terms have become key priorities in negotiations and it is important for parties to maintain good relationships, acting in good faith when responding to shocks in the system. Whether agreeing to index-linked rates to maintain flexibility or fixing rates for a shorter term, all parties should prioritise clarity and enforceability in contractual terms to help avoid disputes as volatility continues to be the ‘new normal’.

Alexandra McCulloch, Trainee Solicitor, assisted in the preparation of this briefing.

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