Although the Shanghai Container Freight Rate Index (SCFI) has recently ended its two-month-long downward trend, the fourth-quarter financial reports of global container shipping companies are still highly likely to result in losses. Behind the short-term index fluctuations lies a complex set of contradictions: pressure on freight rates, declining demand, and excess capacity. The industry is currently facing the toughest closing phase of the year.

Since August, the shipping freight index has shown a "mixed" pattern of rising and falling. On one hand, the SCFI finally broke the 11-week downward trend and rose by 30 points to 1445 points in a single week, injecting a brief sense of confidence into the market; on the other hand, the Drewry World Container Freight Index (WCI) dropped by another 6% the next day, reporting $2119 for each 40-foot standard container (FEU), and the institution predicted that the WCI would continue to decline in the coming weeks. 

Especially on the trans-Pacific route, the freight rates have dropped back to the levels before the Red Sea crisis. Looking back at history, when the freight rates were within this range, shipping companies generally suffered significant losses, which also cast a shadow over the fourth-quarter performance. 

Recent analysis reports from multiple institutions all point to the same conclusion: In the fourth quarter of 2025, container shipping companies will return to the loss-making range. 

Peter Sand, the chief analyst of freight price platform Xeneta, pointed out that even if shipping companies can still make profits throughout 2025, these profits mainly come from the price fluctuations caused by the Red Sea crisis at the beginning of the year. Looking at a single quarter, the loss in the fourth quarter is already certain. "After all, when the freight rate was at the current level last time, the loss of enterprises was quite significant." 

The weakness at the demand end has further exacerbated the profit pressure. According to data from the Asian shipping consultancy Linerlytica, global freight booking volumes have dropped by 5% to 20% in the past two weeks. Core shipping routes such as the transpacific, Asia-Europe, and Latin America routes are all under "severe pressure", and the possibility of a price rebound in September is rapidly disappearing. The agency believes that the problem lies in that shipping companies have failed to reduce capacity in line with the decline in demand, resulting in a continuous deterioration of the mismatch between supply and demand.

The decline in demand in the US market is more pronounced. John McCown, the founder of Blue Alpha Capital, warns that the trans-Pacific shipping routes will face a "grim end of the year": The National Retail Federation (NRF) predicts that the total US imports will drop by 5.6% in 2025, while the US container imports in the first seven months of this year have increased by 3.6% year-on-year - this means that in the last five months of 2025, US container imports need to fall by 17.5% year-on-year to meet the annual forecast, and the freight demand on the trans-Pacific routes will suffer a "catastrophic" decline. 

Seasonal factors will make the situation even worse. Generally speaking, after the Chinese Golden Week (in October), the demand for Pacific routes enters the traditional off-season. And Lars Jensen, the head of the shipping consulting firm Vespucci Maritime, pointed out that if this seasonal pattern occurs as expected, the demand and freight prices on the Pacific routes will further decline. Shippers need to be prepared to face the dense "empty flights" (i.e., cancelled voyages) in the fourth quarter. 

Compared to the short-term losses in the fourth quarter, what worries the industry more is the long-term crisis of overcapacity. Danish shipping consulting firm Sea-Intelligence has warned in its latest report that in 2025 and the following three years, the global container shipping capacity will maintain an average annual growth rate of 5% to 8%, but there is currently no sign indicating that the global container freight demand can keep up with this growth pace.

“In the coming years, the industry will experience a prolonged period of excessive capacity, which will gradually push freight rates for regular shipping to converge with marginal cost levels.” Sea-Intelligence emphasizes that this means the profit margins of shipping companies will be severely constrained over the long term. Even if they manage to regulate capacity through measures like “empty flights” in the short term, it will be difficult to reverse the overall imbalance between supply and demand. 

HSBC also holds a similar view in its updated report on the freight market: Although "capacity discipline" (such as proactive capacity reduction) may provide a short-term boost to freight rates and even trigger a slight rebound, the core imbalance between supply and demand remains unchanged. In the remaining time of the year, freight rates will still face downward pressure. 

From short-term index fluctuations to long-term capacity constraints, the container shipping industry is standing at the crossroads of a "profit decline". For shipping companies, the losses in the fourth quarter might just be the beginning. How to survive in the "low freight rate cycle" in the coming years will become a common challenge for the industry.