The container shipping industry is bracing for a pivotal shift next year, with the anticipated return of vessels to the Red Sea route—a move that is expected to trigger a wave of congestion at European ports, quickly followed by intensifying pressure on shipping rates.
“Container lines deciding to navigate back to the Red Sea is arguably the most important development to watch for in the global shipping market next year,” Rico Luman, senior sector economist, transport and logistics at ING Group, said in a report.
And should one big company decide it’s worth the risk, others will surely follow.
For decades, the Suez Canal has served as a crucial connection for contemporary East-West trade.
It is responsible for carrying over 15% of the world’s goods trade and as much as double that for global container traffic, especially consumer products.
For almost two years, the standard route for most container vessels has involved detouring around the Cape of Good Hope. This change in practice began following the Houthis’ attacks in the Red Sea region in late 2023.
Container rates
The unexpected and extended duration of this avoidance led to a recovery in container rates and liner profit margins, which had previously dropped significantly from the high levels seen during the pandemic in 2023.
Restoring Red Sea transit significantly reduces the Asia–Northwest Europe route by over 3,000 nautical miles, cutting sailing time by approximately 10 days, according to the ING report.
This will eventually lead to a significant increase in available vessel capacity, as the current detour utilises approximately 6% of the global fleet and causes frequent delays.
“That’s why a return will make waves, just as the massive diversion initially did,” Luman said.
Major liner companies are signaling a potential return to the Red Sea following the Gaza ceasefire agreement in October. Maersk and Hapag-Lloyd have indicated they plan to resume transits as soon as conditions are deemed safe.
Similarly, CMA CGM, which maintained limited services with naval protection, is also expected to restart full operations shortly.
Disruption followed by market pressure
Luman said:
Returning to the Red Sea route would be a logical move, but it is also the elephant in the room.
Reopening the passage will ultimately enhance efficiency within customers’ supply chains.
Furthermore, the resulting reduction in extra mileage will lower both fuel consumption and greenhouse gas emissions, which had previously spiked.
However, before the situation returns to normal, new disruptions are likely.
Vessels arriving ahead of schedule could lead to port congestion, potentially jamming container terminals and causing subsequent delays for ships and empty containers throughout the supply chain, according to Luman.
Container liners might blank sailings to mitigate this effect, but overall, freight rates could rise, especially if this shift coincides with the Chinese New Year.
Stabilised sailing schedules will likely cause significant rate drops. This is due to released capacity and new vessels entering service in 2026 from the large order-book.
At the same time, low container volume growth is expected to drive rates down further, outweighing operational cost savings, according to the ING report.
While slow steaming and accelerated scrapping of older vessels may absorb some excess capacity, the surplus will not be fully offset quickly.
Resumption on the horizon
Container liners are hesitant to return too quickly to the Red Sea, even though a return could reasonably happen within the next six months.
This cautious approach, as seen in Maersk’s response to the Suez Port Authority’s initial announcement, is not only driven by the necessity to sufficiently guarantee the safety of vessels, seafarers, and cargo, but also by other strategic considerations, Luman said.
The container shipping industry has experienced a challenging year due to trade disruptions, alliance realignments, and major changes to sailing routes.
Despite this, schedules based on the Cape of Good Hope have become stable, leading to better arrival reliability.
Carriers are cautious about committing to Red Sea routes, seeking assurance that any rerouting will be lasting to avoid the strain of repeated switching.
This stability is crucial for the new Gemini alliance between Maersk and Hapag-Lloyd, which has set an ambitious goal of 90% arrival reliability for its customers, significantly above the industry average.
“Another reason to be cautious is insurance. Premiums for transiting the canal surged and likely need to fall significantly, or voyages must be approved before proceeding,” Luman said.
Carriers will probably start testing the route on the backhaul to Asia with less cargo and lower reliability.
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