In recent years, maritime freight rates have become one of the indicators most affected by global economic and geopolitical developments. From unprecedented increases during supply chain disruptions to sharp declines resulting from greater available capacity and weaker demand on certain routes, the cost of transporting a container can now change the total cost of an entire commercial transaction within just a few weeks.
Dr. Mostafa El Rouby addressed this issue in his article published on 21 August 2025 under the title “Declining Maritime Freight Rates Are Reshaping Global Trade”, explaining that lower costs create genuine opportunities for importers and exporters, while simultaneously imposing contractual and legal challenges on companies bound by long-term shipping agreements.
From an economic perspective, it is more accurate to say that what occurred in 2025 was not a uniform decline across all global shipping routes, but rather a significant fall on a number of major routes following earlier price surges, amid continuing tensions in the Red Sea, trade disruptions, and growing excess capacity in the global container fleet.
Why Have Maritime Freight Rates Declined?
The decline in rates cannot be explained by a single factor. The maritime freight market is highly sensitive to the balance between the volume of goods requiring transportation and the number of vessels, containers, and available slots on shipping routes.
During the summer of 2025, pressure became particularly evident on Asia–United States routes, where spot rates fell sharply after temporary increases associated with tariff changes and attempts by importers to bring forward certain shipments before potential duties took effect.
The principal reasons for the decline include:
- Increased carrying capacity as new container vessels entered the global fleet.
- Weak or slowing demand on certain trade routes.
- The easing of a substantial part of the supply chain congestion that emerged during the COVID-19 pandemic.
- Reallocation of capacity among routes according to new trade patterns.
- Fluctuations resulting from tariffs and international trade policies.
- The use by shipping lines of voyage cancellations or capacity reductions in an attempt to support freight rates.
Market data in August 2025 showed that average spot rates from the Far East to the U.S. West Coast had declined by more than 60% compared with peak levels recorded at the beginning of June of the same year, reflecting the speed at which the market can change.
But Low Rates Are Not a Stable Rule
It is a mistake to build a long-term commercial strategy on the assumption that freight rates will remain low.
Disruptions in the Red Sea have demonstrated that the closure of a route or an increase in security risks can completely alter the cost of a voyage, because rerouting vessels around the Cape of Good Hope increases distance, fuel consumption, and the number of days required for the journey, while also absorbing a significant portion of excess market capacity.
Tariffs, port disruptions, fuel prices, or political crises may likewise cause freight rates to rise rapidly after a period of decline.
Freight costs should therefore be treated as a variable component of risk management, rather than as a fixed figure in a feasibility study.
How Do Importers and Exporters Benefit from Lower Rates?
The most obvious benefit is the reduction in the cost of transporting goods, which may lower the final cost of the product, increase the company’s profit margin, or strengthen its ability to compete in export markets.
Lower freight rates may also allow companies to reconsider markets that were previously too expensive to reach, or to import components and raw materials from more distant locations where the difference in transportation costs becomes economically acceptable.
The shipper’s bargaining position also improves in a market where significant capacity is available, enabling companies to compare offers from multiple carriers and negotiate rates, minimum quantities, and additional service terms.
But the best price is not always the best deal.
A lower freight rate may be accompanied by less flexible terms, higher ancillary charges, reduced schedule reliability, greater reliance on transshipment, or a level of service unsuitable for the nature of the goods.
The Quoted Rate Does Not Always Represent the Final Cost
In maritime transport, a distinction must be made between the Freight Rate, or basic transportation charge, and the total cost borne by the cargo owner.
Depending on the contract and voyage, additional charges may be added to the basic rate, such as:
- Fuel surcharges.
- War and risk surcharges.
- Port congestion surcharges.
- Terminal handling charges.
- Container and late-return charges.
- Demurrage and storage charges.
- Route or port change charges.
Accordingly, comparing shipping line offers solely on the basis of the freight rate may be misleading. The correct comparison should be based on the total shipment cost and service terms.
Declining Rates Create a New Problem in Long-Term Contracts
When spot freight rates are high, shippers typically seek to fix prices through annual or long-term contracts to protect themselves from further increases. However, if the market declines after the contract is signed, the shipper may find itself bound to a rate significantly higher than that available on the spot market.
Conversely, if a carrier enters into a long-term agreement at a low rate and prices subsequently rise sharply, the contract becomes less profitable for the carrier.
This gives rise to one of the most important legal questions: Does a change in market price allow either party to withdraw from the contract or amend the freight rate?
As a general rule, a binding contract does not lose its force merely because the market has become more or less profitable for one party. Price fluctuations are ordinary risks inherent in commercial activity, and no automatic right to terminate the contract should be assumed whenever the market changes.
The China United Lines and Amazon Case… A Practical Example
One dispute that attracted attention in this field was the conflict between Chinese shipping company China United Lines (CULines) and Amazon.
However, the facts require precise presentation. The contract at issue was not concluded in 2025; its principal agreements date back to 2022, when container freight rates were at elevated levels.
The contractual relationship included obligations concerning a specified volume of cargo and agreed freight rates. As the freight market subsequently declined, a dispute arose over Amazon’s termination of the relationship and whether it was required to pay amounts and compensation connected with termination of the contract and failure to satisfy the agreed volume commitments.
The dispute extended to U.S. courts and proceedings before the U.S. Federal Maritime Commission during 2025.
The significance of this case lies not merely in the identity of the parties, but in the way it illustrates the risks associated with Minimum Quantity Commitments in long-term transport contracts when spot rates fall sharply.
Shipping Contracts Should Not Be Based on Price Alone
A modern maritime contract needs to be structured in a way that manages market volatility rather than waiting for it to occur.
Among the most important tools that may be used are:
- Price review clauses: allowing renegotiation when market movements exceed specified thresholds.
- Indexation: linking part of the freight rate to a recognized shipping index rather than fixing the entire rate.
- Blended pricing: combining a fixed component with a variable component.
- Price bands: establishing a minimum and maximum range within which the rate may move.
- Periodic reviews: every three or six months depending on the nature of the business.
- Minimum quantity commitments: setting them realistically in line with the shipper’s actual capacity to perform.
- Regulating the consequences of voyage cancellations or route changes.
The objective is not to make the contract changeable at any time, but to allocate market risks clearly before they arise.
Force Majeure Is Not a Remedy for Falling Prices
One recurring mistake is attempting to rely on a force majeure clause whenever economic conditions change.
Force majeure, in principle, concerns an event that renders performance of an obligation impossible under the applicable legal requirements, not merely an event that makes the contract less profitable or results in a better market price becoming available.
Accordingly, a decline in freight rates does not ordinarily permit the shipper to escape a fixed-price contract on the basis of force majeure, just as an increase in spot rates does not automatically entitle the carrier to refuse to honor the rate previously agreed.
The Doctrine of Exceptional Circumstances under Egyptian Law
Egyptian law also recognizes the doctrine of exceptional circumstances under Article 147/2 of the Civil Code, which permits the judge—where exceptional and general events that could not have been foreseen occur and render performance of the obligation excessively burdensome for the debtor, threatening severe loss—to reduce the burdensome obligation to a reasonable level after balancing the interests of both parties.
However, this rule does not mean that every change in freight rates constitutes an exceptional circumstance.
Price volatility is a normal feature of maritime and commercial activity, and the doctrine applies only when its strict conditions are satisfied. Accordingly, advance contractual regulation remains safer than waiting for a dispute and then attempting to invoke exceptional circumstances before the courts.
Fuel and Geopolitical Risk Clauses
The basic freight rate may decline while fuel costs or security risks increase. It is therefore essential for the contract to clarify how additional charges are calculated rather than leaving them entirely to the carrier’s discretion.
Depending on the circumstances, contracts should specify:
- How fuel surcharges are calculated.
- When a War Risk Surcharge may be imposed.
- The consequences of closure or unavailability of a shipping route.
- The carrier’s right to reroute the vessel.
- Who bears the additional cost resulting from the longer route.
- The obligation to notify the shipper of material changes.
These provisions have become particularly important in light of continuing risks affecting the Red Sea and certain strategic maritime corridors.
Spot Contract or Long-Term Contract?
There is no single answer suitable for all companies.
Spot contracts allow shippers to benefit quickly from declining market rates, but expose them to the risk of sudden increases and insufficient space during periods of high demand.
Long-term contracts provide greater stability and capacity allocation, but may become costly if market rates fall sharply.
For this reason, some companies divide their requirements, contracting for part of their volumes at long-term rates to secure capacity while leaving another portion for the spot market to benefit from price movements.
This model provides a form of operational hedging without the use of complex financial instruments.
Carrier Selection Should Not Be Based on Price Alone
When freight rates decline, competition among shipping lines increases, and shippers may be inclined to select the cheapest offer immediately.
However, commercial and legal due diligence on a carrier should include:
- Schedule reliability.
- The number of transshipments.
- Liability for delay and damage.
- The port network served.
- Insurance coverage.
- Terms of the bill of lading.
- Financial standing and operational reputation.
- The claims settlement system.
A modest increase in freight cost in exchange for a more reliable and less risky service may be a better economic decision than choosing the lowest nominal rate.
The Hamburg Rules and Limits of Carrier Liability
In Egypt, when drafting a maritime transport contract, account must be taken of the 1978 United Nations Convention on the Carriage of Goods by Sea, the “Hamburg Rules”, in cases falling within its scope of application, alongside the provisions of Maritime Trade Law No. 8 of 1990.
The Hamburg Rules establish a regime governing carrier liability for loss, damage, and delay, and do not permit contractual terms that reduce the carrier’s liability in violation of their provisions where the Convention applies.
Accordingly, flexibility in determining freight rates does not mean that the parties are free to exclude mandatory liability rules or deprive them of their substance.
Maritime Legislative Amendments in Egypt During 2025
The year 2025 witnessed the issuance of three important laws affecting the regulatory environment of the Egyptian fleet: Laws Nos. 2, 3, and 4 of 2025.
These laws do not regulate freight rates themselves, but primarily aim to modernize rules governing safety, nationality, and registration and facilitate expansion of the Egyptian fleet.
Law No. 3 of 2025 and Expansion of the Ability to Fly the Egyptian Flag
Law No. 3 of 2025 amended certain provisions of Maritime Trade Law No. 8 of 1990 and expanded the circumstances in which a vessel may acquire Egyptian nationality.
Subject to the applicable legal conditions, a foreign bareboat-chartered vessel leased to an Egyptian natural or legal person may now acquire Egyptian nationality throughout the charter period where the charter term is not less than two years. The Law also regulates the financial leasing of vessels.
The economic significance of this rule lies in enabling Egyptian companies to increase their operational capacity without requiring them to purchase the vessel outright from the outset.
Law No. 2 of 2025 and Maritime Safety
Law No. 2 of 2025 complemented this framework by amending certain provisions of Ship Safety Law No. 232 of 1989.
Among other matters, it regulates requirements relating to new vessels and foreign vessels intended for registration in Egypt, establishing, as a general rule, a maximum age of 25 years for vessels and marine units and 20 years for passenger vessels, in addition to inspection and survey requirements.
These rules are important in the context of declining freight rates because they confirm that price competition should not come at the expense of fleet quality and safety.
Law No. 4 of 2025 and the Ship Registration System
Law No. 4 of 2025 also amended Commercial Ship Registration Law No. 84 of 1949 and linked the registration system to the developments introduced by Law No. 3 of 2025 concerning chartered vessels and financial leasing.
It also regulated certain cases involving suspension of Egyptian registration where an Egyptian vessel is chartered for temporary registration under a foreign flag and strengthened compliance with registration requirements.
Together, these laws provide greater flexibility in building the fleet while maintaining regulatory and safety requirements.
Lower Freight Rates Are an Opportunity for Egyptian Exporters
The benefits are not limited to importers.
For Egyptian exporters, transportation costs are a decisive factor in competitiveness, particularly for products in which logistics represent a substantial proportion of the final price.
Lower freight rates may make it possible to reach more distant markets or offer more competitive pricing to foreign buyers, particularly where Egyptian products compete with suppliers geographically closer to the target market.
However, taking advantage of this opportunity requires exporters to review the international sales terms Incoterms they use, because lower freight costs do not benefit the exporter to the same extent where the buyer is the party responsible for arranging transportation and bearing its cost.
Incoterms and Allocation of the Benefits of Lower Freight Rates
It is important to distinguish between the contract of sale and the contract of carriage.
Where the sale is on FOB terms, the buyer generally bears the principal maritime transportation cost, while the position differs under terms such as CFR or CIF, where the seller arranges maritime transportation within the scope of each term.
Accordingly, a company seeking to benefit commercially from lower freight rates should review the terms of its sales contracts as well as its transport contracts.
A shipper’s awareness of lower rates may become an important negotiating tool where it is able to offer foreign customers a more competitive transport-inclusive price.
Hidden Risks Behind Extremely Low Freight Rates
Continued pressure on rates may lead shipping companies to adopt measures to protect profitability, such as cancelling voyages through Blank Sailings, reducing capacity, and reallocating vessels among routes.
This means that a low rate may be accompanied by reduced schedule reliability or fewer available sailings.
Some companies may also postpone investment in fleet modernization if returns remain depressed for an extended period, making maintenance of safety and sustainability standards an economic challenge for the industry.
Accordingly, the shipper should not measure its gain solely by the amount saved on the container freight rate, but also by the cost of any potential delay and its impact on production, inventory, and obligations toward customers.
How Can Companies Benefit from the Current Market?
Companies may follow a number of practical steps:
- Review existing shipping contracts to determine how far agreed rates differ from prevailing market levels.
- Do not terminate the contract unilaterally merely because a cheaper rate has been found without first reviewing termination provisions and compensation obligations.
- Renegotiate where the contract permits or where preserving the commercial relationship is in the interests of both parties.
- Diversify shipping lines and routes and avoid relying on a single carrier for strategically important goods.
- Split volumes between long-term contracts and the spot market where appropriate.
- Review all additional charges, not merely the basic freight rate.
- Monitor market indices before renewing annual contracts.
- Review international sales terms and insurance in parallel with the transport contract.
The Role of Legal Counsel in a Rapidly Volatile Market
When rates are stable, certain contractual provisions may appear unimportant. When the market changes, however, they may become the core of the dispute.
Legal review of a long-term shipping contract includes, among other matters:
- The mechanism for determining and adjusting freight rates.
- Minimum quantity commitments.
- Consequences of failing to tender the agreed quantities.
- Early termination provisions.
- Force majeure and exceptional circumstances.
- Rerouting and war risks.
- Fuel and port charges.
- Liability for damage and delay.
- Time limits for notification of claims.
- The applicable law and arbitration or competent court.
Sometimes the most serious cost in a shipping transaction is not a high freight rate, but a low-priced contract drafted in a manner that prevents the company from protecting itself when a crisis occurs.
The Role of the Office of Dr. Mostafa El Rouby – Attorneys and Legal Consultants
The Office of Dr. Mostafa El Rouby – Attorneys and Legal Consultants believes that freight rate volatility requires a shift from reviewing the contract merely as a legal document toward treating it as an instrument for managing commercial risk.
Legal support for companies operating in trade and maritime transport includes:
- Drafting and reviewing maritime transport and logistics agreements.
- Reviewing long-term shipping agreements and minimum quantity commitments.
- Drafting price review, indexation, and surcharge clauses.
- Reviewing force majeure, exceptional circumstances, and rerouting provisions.
- Analyzing carrier liability under Egyptian law and international conventions.
- Negotiating contractual restructuring when market conditions change.
- Managing disputes and arbitration relating to shipping agreements, delays, and cargo.
- Providing advice on vessel registration, financing, and chartering in light of the 2025 amendments.
Conclusion
Declining maritime freight rates represent an important opportunity for importers and exporters, but should not be viewed as an entirely positive development in absolute terms.
The decline may result from excess capacity or weak demand and may reverse rapidly as a result of a geopolitical crisis or trade disruption. Lower rates also create challenges for shipping companies and may prompt them to reduce capacity or cancel sailings in order to preserve economic balance.
From a legal perspective, market volatility demonstrates that a successful maritime contract is not the contract under which one party secures the best price on the day of signing, but rather the contract that remains workable when circumstances change.
Accordingly, freight review clauses, allocation of fuel and war risks, minimum quantity commitments, early termination, liability, and dispute resolution become essential elements no less important than the price itself.
The amendments to Egyptian maritime legislation during 2025 also added another element to the picture by facilitating fleet expansion through chartered vessels and financial leasing while strengthening registration and safety requirements.
Accordingly, the greatest benefit from declining freight costs is achieved when a company combines the economic opportunity, a well-structured legal contract, and informed risk management.