The recent ceasefire in Gaza, the pause in merchant ship attacks in the Red Sea by the Houthis, and the release of Galaxy Leader crew by the Houthis will likely firm up sentiment towards peace being restored in the region and weigh further on spot freight rates, according to a new HSBC Global Freight Monitor.

Due to the Red Sea unwinding, it noted that the Shanghai Containerized Freight Index (SCFI) fell 4% week-on-week, a third consecutive week of decline, on volume weakness into the Lunar New Year (LNY).

The report also cited Clarksons' estimates that a gradual unwinding of the Red Sea diversions will result in a 3.6% decline in TEU miles in 2025 and a steeper 7.7% decline with immediate unwinding.

"While Clarksons estimates nominal fleet capacity growth of 5.4%, we think effective fleet growth could be higher as the unwinding of the Red Sea diversions could bring back about 7% of the fleet," HSBC said.

It noted that 2025 is a year of "two halves for container lines."

"Beyond the LNY, we argue that blank sailings, alliance reshuffle, and uncertainties around Trump’s tariffs could likely cushion against a hard landing in spot rates," HSBC said.

"With little incentive for liners to revert to the Red Sea, we think liners could still see decent 1H25 earnings but profits should deteriorate in 2H25," it added, noting the assumption base case is that Red Sea transits will resume around mid-2025, resulting in a 10.5% increase in effective capacity for that year, compared to only a 2.7% growth in volume and a decrease in TEU-miles.

Meanwhile, the HSBC Freight Monitor also expects a weaker air freight demand-supply balance in 2025.

It noted that the Baltic Air Freight Index fell 5% week-on-week and 14% year-to-date (to Jan. 20, 2025), reflecting the seasonal post-holiday volume decline.

"With the Red Sea disruptions fading and restocking largely complete, we expect a weaker demand-supply balance in 2025," the analysis said, also citing IATA's cargo growth outlook seen to slow to 5.8% in 2025 (versus 11.5% in 2024) and undershoot capacity growth of 6.4% (higher aircraft deliveries and pax flight ramp-up).

"While we expect ecommerce to remain resilient, there are some early signs of a B2B recovery," HSBC said.