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No crisis for carriers despite tariffs and new construction

“The bears are slowly roaring in the market for carriers” – despite a cocktail of tariffs and rising supply, there are signs that 2025 will be a volatile year. However, the analysis platform Veson Nautical does not expect a slump.

The carrier market has been characterised by relatively pronounced optimism for some time now, with many newbuilds being ordered in order to meet expected future demand and modernise the global fleet.

In the meantime, however, there are developments that are causing the first worry lines to appear on some people’s faces. After the European Union (EU) announced that it would increase import duties on electric vehicles (EVs) manufactured in China to up to 45.3%, a rather pessimistic mood spread across the market for car carriers in June. The EU tariffs, which came into force in November for a period of five years and were increased following an investigation into Chinese state subsidies for domestic car manufacturers, are weighing on confidence, which has created significant headwinds for car carrier operators, according to a recent report by the Veson platform (which also includes the industry service VesselsValue).

The share price of car carrier shipping company Wallenius Wilhelmsen slumped at the end of October following the publication of its third-quarter results, falling by almost 20% within two weeks, before partially recovering after stock analysts pointed to weaker forecasts for global car sales. Wallenius Wilhelmsen’s updated outlook yesterday points to another solid year in 2025, based on year-on-year adjusted EBITDA growth of 7-12%.

But: “The bears are starting to roar, but we believe that demand for deep-sea roll-on/roll-off (RoRo) transportation from China is strong enough to assume that rates and assets in this sector will not crash in the short to medium term,” says Veson analyst Andrea De Luca in the new report.

Cars from containers back on carriers?

Brunswick, Georgia, Car Carrier, Wallenius, Terminal, Wilhelmsen
Wallenius Wilhelmsen has signed a concession for at least 20 years in Brunswick (© Wallenius Wilhelmsen)

VesselsValue has also identified around one million “cars in containers” from China that are likely to switch back to RoRo transportation in 2025/26, which will boost demand for car carriers.

However, freight rates for light vehicles from China to Europe have started to weaken as China’s export volumes are expected to grow at slower rates and large newbuilds are being delivered in greater numbers.

These include the “Hoegh Aurora”, a car and truck transporter (PCTC) with 9,100 car equivalents (CEU), which was delivered by China Merchant Heavy Industries to the Norwegian company Höegh Autoliners in August, as well as the armada of 30 PCTCs from China COSCO Shipping Corporation (COSCO), which are to be delivered by 2026.

However, Veson’s assessment for carriers remains unchanged: “Although the economic headwinds appear to be stronger than the tailwinds, we do not expect charter rates to fall back to long-term averages due to the stable demand outlook from Asia, which is driven by China.”

China needs Europe more than the USA

China’s car market surpasses that of Japan and South Korea, with around 26 million cars sold per year, which means that almost one in three cars sold worldwide is manufactured in China. Therefore, the potential for China to export further is enormous.

Car Carrier
Car carriers are an important factor in Bremerhaven (© BLG)

However, Veson estimates that the tariff increases adopted by the EU could deprive China of around 10% of global demand that cannot easily be replaced elsewhere, which corresponds to a decline in global demand of around 2%. “And if the EU wants to achieve a 55% reduction in CO2 emissions by 2030 and zero CO2 emissions by 2035, it needs to work with China, so a solution needs to be found very soon. The same applies to the US, where tariffs on electric vehicles are already at 100% and could rise even further under President Trump’s administration.”

Car carrier fleet grows by 11%

This all leads to a volatile 2025 for the Car Carrier market. The 39% ratio of backlog to the current fleet will lead to a whopping 11% increase in net supply in 2025, which could have profound implications.

Furthermore, an earlier-than-expected resolution to the Red Sea crisis could see this figure rise by a further 6% to 17% as shorter and more frequent transits return to the Suez after an initial period of congestion.

“Although this scenario is unlikely, it could tip the market for carriers into oversupply territory and trigger a perfect storm on rates and asset values that would trigger a major scrappage round.”

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Caption: The "Pontus Highway" car carrier from K-Line has a capacity for 7,000 vehicles (© K-Line)