The evolving tide: the present and future of maritime transport

In brief

• While geopolitical disruptions are beginning to unwind, their impact on global supply chains may persist. Shipping demand is expected to remain strong, and supply should ease in the near term as the extended use of older ships is unlikely to be maintained.
• Global trade will evolve in response to more nationalistic trade policies and geopolitical conflicts. As trade routes evolve with expanding South-South trade, the overall volume of trade may not decline, with new goods reaching new markets.
• Shipping and transportation investment strategies provide diversification benefits, serving as a hedge against inflation and generate steady income through leasing models.

Maritime transport carries 80-90% of the international goods trade. If shipping is the backbone of global commerce, then shipping routes are the blood vessels. However, geopolitical tensions have disrupted shipping routes, lengthening supply chains. Meanwhile, the risk of rising U.S. tariffs has increased demand through front-loading of global trade. The uncertainty surrounding broader trade conflict raises new challenges and opportunities for the shipping industry.

Trade routes rewired

Compared to just over a year ago, when the sector was expected to face rising vessel overcapacity, disruptions like the Red Sea shipping crisis has led to rerouting around the Cape of Good Hope in South Africa, adding 4000 miles to each journey and increasing transit times by 30%. Meanwhile, the Panama Canal's reduced capacity, due to lower water level, has impacted North American supply chains, prompting a shift to alternative routes. Labor strikes in the U.S. have also, at times, disrupted ports along the east coast, adding to delays. These events resulted in longer routes, higher vessel demand and higher insurance premiums, consequentially pushing up freight rates. For example, disruptions in the Red Sea led to a five-fold increase in Asia-Europe freight costs¹ and global freight rates to more than double in the first five months of 2024 (Exhibit 1).

Exhibit 1: Freight rates remain elevated on higher delays
Average delays for late vessel arrivals (left) versus freight rates (right)

Source: Bloomberg, Sea Intelligence, Drewry, Logistics Managers’ Index. Freight rates based on Drewry World Container Index.
Data reflect most recently available as of 11/02/25.

Demand expected to remain strong

Although the geopolitical pressures impacting shipping are starting to ease, these effects are likely to linger supporting shipping demand and freight rates. For example, leading carriers are only planning for partial resumption in activity through the Suez Canal (for smaller vessels) despite the ceasefire announced in the Middle East region, suggesting that the preference for assurance of safe passage outweighs the higher costs associated with longer routes.

The magnitude of these events is clear in the increase in global demand. Global shipping demand increased 7.1% in 2024 when measured in TEU miles², far exceeding the initial 2% industry estimates or the 3% long-term average growth rate. While partly a consequence of conflict-disrupted shipping routes, robust U.S. demand and front-loading of global trade ahead of potentially higher tariffs were also contributing factors.

Demand is expected to remain strong for another year. The International Monetary Fund (IMF) projects global trade growth of 3.4% in 2025, and demand growth to remain close to last year’s level. The Logistics Managers’ Index (LMI) -  which surveys logistics supply executives on their current view and outlook – reinforces the resilience in demand. The latest future and current reading on inventory level at 64.1 and at 58.5, respectively, points towards the further expansion of inventory levels, while the widening gap between LMI transportation capacity and prices index suggests freight costs should remain supported (Exhibit 2).

Exhibit 2: Constrained capacity supports freight costs
Select subindices of the Logistics Managers’ Index (LMI) survey

Source: Bloomberg, Sea Intelligence, Drewry, Logistics Managers’ Index. Based on diffusion index methodology, which above 50 indicates expansion and below 50 indicates contraction.
Data reflect most recently available as of 11/02/25.

Unmatched supply response

Historically, higher demand would attract an increase in supply, but it could take years to bring this supply online. While net supply on global fleet expanded at an unmatched 10.5% over 2024, this pace of shipping supply growth is unlikely to be maintained. Vessels ordered during the COVID pandemic period are mostly completed, and deliveries likely peaked in 2024. Vessel scraping was also at a historical low in 2024, as carriers extended the life of older ships to take advantage of higher charter rates. However, this is not a practice that can be maintained in perpetuity.

Both demand and supply sets up a constructive outlook for the shipping industry in the near term. However, the longer outlook for shipping will be influenced by the growing fragmentation in global trade.

Charting new courses

The United Nations Conference on Trade and Development (UNCTAD) projects maritime trade to grow at an average annual rate of 2.4% from 2025 to 2029. Optimists highlight growth drivers such as Asia's continued rise as an export leader, increased demand for green energy products etc. On the flip side, some may point out that goods trade growth has slowed in recent years. This trend can be attributed to prior supply chain disruptions and the shift towards greater growth in services trade rather than goods trade. Nonetheless, trade in goods registered a steady 2.4% compound annual growth rate (CAGR) over the past 10 years (Exhibit 3).

Exhibit 3: Growth in global goods and services trade
Indexed to 2005 = 100

Source: UNCTAD, J.P. Morgan Asset Management.
Data reflect most recently available as of 11/02/25.

The latest round of tariff announcements from the U.S. is a continuation of recent policies that emphasize the rise in nationalistic trade policy, which could constrain global trade and notably between China and major developed economies³.

Although global trade faces some clear obstacles, it is not disappearing; rather, it is transforming. An important shift is the increase in South-South trade⁴, with its share of global trade increasing 14.1 percentage points from 1995 to 2020 and accounts for a quarter of all trade (Exhibit 4). Rising economic and trade linkages is also evident in the growth in intra-regional trade agreements and free trade areas within Global South. Total intra-Asia containerized trade volume grew at a CAGR of 3.6% from 2019-2023, significantly surpassing global shipping trade’s growth, which only had a 0.7% CAGR in the same timeframe, according to Drewry data.

Exhibit 4: Share of global trade

Source: UNCTAD, J.P. Morgan Asset Management. UNCTAD secretariat calculations, based on UNCTADstat Database, Merchandise Trade Matrix.
Data reflect most recently available as of 11/02/25.

Several factors drive this trend:

• China is diversifying its export markets into the other emerging markets as U.S.-China trade tensions rise. Another structural push comes from the demand for cleantech (e.g. electric vehicles, batteries, solar panels), where China is playing a key role in facilitating a cost-effective energy transition in the South. From an import angle, China’s national security strategy also prompts reducing reliance on the U.S., such as sourcing soybeans from Brazil instead of the U.S.
• Global supply chain diversification towards a "China + N" strategy has led companies to forge new trade relationships with emerging manufacturing hubs like India, ASEAN and the Gulf Cooperation Council countries. Beyond China, India and Africa are strengthening ties due to geographical proximity, while the Gulf States play a dominant role in regional investments with their substantial sovereign wealth funds.
• The pandemic-induced shipping disruptions have also underscored the need for more robust supply chains, prompting companies to expand their supply chains and trade presence within Asia to cater to the growing Asian consumer markets.

Investment implications

The near-term uncertainty regarding the extent to which the U.S. administration will leverage the use of tariffs in its foreign policy objective will continue to be a source of market and economic volatility. However, trade and shipping often move to much longer-term themes given their key role in supporting global economic activity.

Shipping, and transportation more broadly, present a compelling investment case in the current macroeconomic environment. Shipping remains relatively stable due to its essential role in supply chains and the global economy. Because of this, transport assets have a lower correlation to public market assets, thus improving portfolio diversification.

Meanwhile, real assets such as transportation can serve as a hedge against inflation, should U.S. tariffs and tax cuts lead to another bout of rising prices. This steady demand, coupled with the leasing model now associated with financing the sector, can provide investors with an alternative stream of steady income.

¹Based on Drewry World Container Index Shanghai-Rotterdam costs.
²TEU refers to twenty-foot equivalent unit, which is a standard measure for container capacity.
³For example, both Canada and European Union placed tariffs on Chinese-made electric vehicles in 2024. There are also various tariffs and export controls between U.S. and China.
⁴By UNCTAD definition, South-South trade refers to trade within the Global South, which broadly includes Africa, Latin America and the Caribbean, Asia (excluding Israel, Japan, and South Korea), and Oceania (excluding Australia and New Zealand).

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