*The return to shorter routes through the Suez Canal and a glut of new vessels in service threaten to keep freight rates depressed.*
Container freight rates have plunged in 2024, roughly halving from about $4,000 per standard container at the year’s start to around $2,000 now. This slide was briefly interrupted by a price surge when conflict in the Red Sea forced ships onto longer detours around Africa, driving up rates in early 2024. However, that spike has faded, and analysts warn that a full return to normal routes could unleash excess capacity and cause freight rates to collapse.
Exacerbating the pressure on rates is a wave of new ships entering service. The global container fleet expanded by over 10% (adding nearly 3 million TEU of capacity) in 2024 – a record influx that has flooded the market with tonnage and intensified downward pressure on pricing. So far, the Red Sea detours have absorbed much of this excess capacity, preventing a glut, but as routes normalize that surplus will return to the market. Carriers might attempt to counter overcapacity with blank sailings, idling, or scrapping older vessels, but these measures are unlikely to be enough to prevent freight rates from sinking further.
These industry headwinds are squeezing Hapag-Lloyd’s financial results, shrinking profit margins and eroding the windfall gains of the pandemic shipping boom. The company’s net profit in 2024 was about €2.4 billion – down nearly 19% from the prior year and a far cry from its record €17 billion profit in 2022. Hapag-Lloyd’s management has cautioned that the environment remains fragile, and it expects earnings in 2025 to be even lower than in 2024 amid volatile rates and geopolitical uncertainties. If freight rates remain at or below today’s depressed levels, the carrier faces further margin erosion and a potential “perfect storm” of prolonged low rates undermining its post-pandemic profitability.