Charting the course through a dynamic Q1
The first quarter of 2025 presented a complex landscape for global logistics marked by a familiar blend of cautious optimism, persistent challenges, and structural shifts. Understanding the key dynamics is crucial: How did the Eurozone economy truly perform amidst underlying fragility? What defined sea freight operations given massive capacity influxes, ongoing port congestion, and evolving carrier strategies? And what characterized the air cargo market regarding rates, demand shifts driven by e-commerce, and emerging sustainability mandates?
Our Q1 2025 recap dives deep into these critical questions. In this blog, we will dissect the key economic indicators influencing trade, unpack the latest developments in the sea and air freight markets, and provide insights to help you make informed decisions in the months ahead. Stay with us as we explore the trends, challenges, and opportunities that defined the start of the year and set the stage for Q2.
Let’s jump right in!
The economic climate: Cautious headwinds in Q1 2025
The Eurozone economy navigated Q1 with cautious fragility. While avoiding a sharp downturn, momentum remained subdued, influenced by geopolitical tensions and policy uncertainty impacting investment and exports. Resilient domestic demand, supported by rising real incomes, offered some counterbalance.
- Inflation easing, but volatile: A key positive was the continued disinflationary trend. Eurozone HICP inflation remained on a path toward the ECB’s 2% target. Core inflation eased, though volatile energy and food prices exerted short-term upward pressures. Overall, the ECB viewed the disinflation process as largely on track by quarter’s end.
- Manufacturing stabilizing, employment weakening: The manufacturing sector showed faint signs of stabilization, with the February HCOB PMI reaching its highest point since early 2023 (47.6), indicating the mildest contraction in almost two years. Business confidence improved slightly within the sector. However, this was offset by reports of accelerated job losses in manufacturing and a broader deterioration in employment expectations, particularly in services and construction, signaling underlying business caution.
- ECB action: Reflecting the mixed signals of stagnant growth and progressing disinflation, the ECB implemented a key interest rate cut during the quarter, acknowledging economic weakness while aiming to support demand.
Sea Freight under pressure: Q1’s capacity, congestion & competition
Q1 2025 in container shipping was defined by the arrival of massive new vessel capacity colliding with stubborn operational bottlenecks and the initial stages of a major carrier alliance shake-up.
Unprecedented capacity influx: The dominant story was the surge in new ship deliveries. By March 1, global fleet capacity hit 31.839 million TEU, up 9.86% year-on-year. A huge orderbook (28.3% of the active fleet) signaled further expansion. This influx significantly outweighed moderate demand growth, raising overcapacity concerns throughout the quarter.
- Congestion persisted, especially in Europe: Port congestion remained a major disruptor. While some areas improved, bottlenecks plagued Southeast Asia and the Middle East. The situation notably worsened in Europe due to labor disputes, intensifying delays. As of March, an estimated 8.4% of the entire global fleet (2.65 million TEU) was tied up in congestion, directly impacting schedule reliability. Continued Red Sea diversions via the Cape of Good Hope absorbed some capacity but extended transit times.
- Alliance restructuring commenced: The quarter marked the beginning of a significant shift away from the established three-alliance structure. The confirmed end of 2M and changes within THE Alliance signaled a move towards new, distinct groupings and large independent carriers. Early signs included reduced vessel sharing and a shift to single-carrier services on some routes, introducing immediate network planning complexities.
- Rates under heavy pressure: Reflecting the supply-demand imbalance, freight rates dropped sharply. The Shanghai Containerized Freight Index (SCFI) fell by $1,644 from the year’s start to $1,318 by late March. This decline occurred despite disruptions, highlighting the overriding impact of excess capacity and cautious demand during Q1.
For more on these Q1 sea freight events, listen to the dedicated episode of our FortoBites podcast.
Air Freight dynamics: Q1 rates, modal shifts & operations
The air freight market in Q1 exhibited distinct trends, including recovering rates after a soft start, a notable shift from ocean freight, and varied operational pressures.
- Rate fluctuations & regional variations: The quarter began with unusually low rates on key Far East Westbound routes, declining into February before starting a recovery. Rates from China/Hong Kong to Europe ended Q1 roughly 10-12% higher year-on-year. Hong Kong to US rates peaked post-Lunar New Year, partly due to tariff uncertainty. Notably, Europe to US rates remained significantly elevated (up over 20% YoY). Demand patterns varied regionally, with Europe showing strong month-on-month growth, particularly to North America.
- Significant modal shift: A clear trend throughout Q1 was shippers moving cargo from ocean to air or sea/air solutions. This was primarily driven by the need for speed and reliability amid ocean freight’s high costs, delays (Red Sea diversions, congestion), and general uncertainty.
- Operational realities: Businesses faced several operational factors: ongoing trade tension awareness influencing planning, the need for proactive booking to secure strained capacity (especially belly-hold), and minor delays caused by disruptions like strikes at major German airports.
- Sustainability mandate begins: Q1 marked the implementation of the EU’s RefuelEU Aviation regulation, mandating a 2% Sustainable Aviation Fuel (SAF) blend at EU airports starting January 1, 2025. Carriers began incorporating SAF surcharges, introducing a new cost component and requiring adaptation from shippers and forwarders regarding pricing and future sustainability reporting. Forto started certifying emissions savings based on this mandate.
In summary, Q1 air freight saw rates recover from lows, a significant boost from modal shift, varied regional performance, and the initial adaptation to the EU’s SAF mandate alongside typical operational challenges.
Tune into the air freight episode of our FortoBites podcast for more Q1 details.
Key takeaways from a complex quarter
Quarter 1 of 2025 reinforced the dynamic and often challenging nature of global logistics. The period was defined by a fragile Eurozone economy, a sea freight sector grappling with excess capacity and severe congestion while starting a major restructuring, and an air freight market experiencing rate shifts, significant demand transfers from ocean, and the dawn of new sustainability rules.
For businesses, Q1 demanded:
- Constant adaptation: Navigating economic caution, port delays, and evolving carrier networks required flexibility.
- Proactive capacity management: Securing space, whether on vessels facing network disruption or aircraft with tight capacity, was crucial.
- Vigilant cost control: Managing fluctuating rates and new surcharges (like SAF) required close attention.
- Informed decision-making: Visibility into specific lane conditions was essential throughout the quarter.
The conditions experienced in Q1 highlighted the ongoing need for resilient logistics strategies and the value of knowledgeable partners capable of providing insights and solutions in a fluid market environment.
For more detailed information, as well as the valuable insights from our logistics experts, make sure to check out the recording of our latest webinar.
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If you want to navigate these ongoing complexities with a strong partner by your side, make sure to reach out to us. Our team of logistics experts is happy to talk to you!
