Spot freight rates are set to drop sharply, leading to service challenges in container shipping, warns JP Morgan and S&P Global.
Container shipping is facing significant structural service challenges as spot freight rates are projected to decline sharply, according to a report by S&P Global.
JP Morgan forecasts that rates will decrease by 40 percent year-over-year in 2026, followed by an additional 20 percent in 2027. This downturn is expected to result in substantial losses for carriers due to oversupply and slowing demand.
While shippers may benefit from lower prices, service reliability is deteriorating. Issues such as blank sailings, cargo rollings, and geopolitical shocks have prompted major carriers like Maersk and Hapag-Lloyd to form an alliance aimed at enhancing reliability.
Analysts caution that the pressures on service quality are structural rather than cyclical. Geopolitical disruptions, climate-related impacts such as the drought affecting the Panama Canal, and lingering congestion from the Covid era have created systemic stress within supply chains.
The World Bank's Global Supply Chain Stress Index is nearing pandemic levels, indicating longer voyages, slower steaming, and increased port delays. Berth productivity has not rebounded since the Covid pandemic, with North Europe facing labor disputes and infrastructure limitations.
Additionally, larger vessels, ranging from 20,000 to 24,000 TEU, now require more time in port, exacerbating congestion. Consultant Steve Rothberg notes that terminals often lack sufficient cranes, resulting in longer berthing times for vessels and delays for others.
Carriers are also managing capacity aggressively through idling, blank sailings, and slow steaming. While these strategies help absorb excess supply, they compromise service quality, forcing shippers to maintain higher inventory levels despite lower freight costs.
