A ceasefire in the Red Sea could reopen shipping routes through the Suez Canal, creating excess capacity and driving down global container shipping rates.
Shipping routes diverted around the Cape of Good Hope to avoid attacks since November 2023 have had a significant positive impact on shipping rates – particularly in the container shipping industry. However, if the ceasefire allows ships to return to the Suez Canal, that trend could be reversed.
In a statement released yesterday, Oman’s Foreign Minister Badr Albusaidi said talks aimed at easing tensions in the Red Sea had led to an immediate ceasefire.
“Neither side will target the other … ensuring freedom of navigation and the smooth flow of international commercial shipping in the Red Sea,” Albusaidi said.
US President Donald Trump also confirmed that a ceasefire had been reached.
The news comes just days after the Houthis threatened to attack US oil tankers.
The biggest impact, however, will come from the container shipping sector, where a large number of vessels currently operating around the Cape of Good Hope – more than 1 million TEU – could become redundant, not to mention the 1.5 million TEU of new capacity expected to be delivered from shipyards this year.
“The one element of the container shipping market that affects freight rates the most [Red Sea diversions] – may be nearing an end,” Xeneta senior analyst Peter Sand said on LinkedIn. “But let’s see if this is really happening.”
Shippers trading between Europe and Asia have been paying much higher rates than they did before the Red Sea crisis – at a cost that has left shipping lines losing money.
Peter Sand compared Xeneta’s rate data from 7 November 2023 with current Far East-Mediterranean rates, showing that spot rates in 2023 are up to 70% lower than today.
Currently, spot rates from Asia to Europe are at $3,139 per FEU, while long-term rates have increased by 55% to $2,519 per FEU. “This will change a lot when carriers eventually return to their normal service routings,” Sand said.
According to MDS Transmodal data as of December 2023, there were 377 vessels operating on the Asia-Europe trade with an average capacity of 15,417 TEU, for a total of 5.8 million TEU. By December 2024, that number will rise to 459 vessels, averaging 15,271 TEUs per vessel, totaling more than 7 million TEUs. By January 2025, it will drop slightly to 450 vessels with 6.9 million TEUs.
In fact, if the Asia-Europe route returns to its 2023 configuration with comparable demand, about 73 vessels with a capacity of over 15,000 TEUs will have to be reassigned to other routes.
“If transiting the Red Sea to its full extent is once again safe. The balance of the market will once again shift. From its current tightness to one where overcapacity will depress freight rates,” Sand predicts.
However, there are still questions about whether the fighting has actually ended, as the Houthis told Reuters that the conflict with Israel was not part of any of the terms of the Oman-brokered deal.
Israel and Yemen continue to escalate, with both sides attacking each other’s airports. Israel’s airstrike on Sanaa airport injured 21 people, reportedly in response to an earlier attack on Ben Gurion airport that injured eight.
The Houthis have accused the “US-Israeli aggression” of being behind the Sanaa airport attack, while the US has denied any involvement.
Although the fighting shows no signs of ending, the prospect of reopening the Suez Canal could radically change the global supply-demand balance and container shipping rates.
SUN VN nhận đinh, bản thân là một công ty forwarder với hơn 20 năm kinh nghiệm và có hợp đồng giá rẻ với các hãng tàu chuyên đi Mỹ và Canada và đóng console. Với việc ngừng bắn tại biển Đỏ sẽ giúp ích và tác động rất nhiều đến thị trường Logistics. Giúp giảm thiểu thời gian lưu thông hàng hóa qua các thị trường đáng kể, giá cước giảm giúp người bán, người mua và các hãng tàu có thêm nhiều lựa chọn hơn từ đó làm cho dòng chảy logistics lưu thông mạnh mẽ và ngày càng phát triển hơn. SUN VN cũng quan ngại và kêu gọi các bên ngừng bắn vì hòa bình thế giới và các hơn hết là sự ổn định trong các khu vực xung quanh để dòng chảy kinh tế tại các nước lân cận nói chung và thế giới nói riêng được phát triển mạnh mẽ hơn.
SUN VN’s Statement:
As a forwarding company with over 20 years of experience and contracted competitive rates with shipping lines specializing in routes to the U.S. and Canada, as well as in cargo consolidation, SUN VN believes that a ceasefire in the Red Sea will greatly benefit and positively impact the logistics market.
It will help significantly reduce transit times for goods through various markets, and lower freight rates will offer more options for sellers, buyers, and shipping lines. This will enhance the flow of logistics, making it more dynamic and increasingly developed.
SUN VN also expresses concern and calls on all parties to cease hostilities for the sake of world peace and, more importantly, to ensure stability in surrounding regions. This will support stronger economic flows in neighboring countries in particular, and globally in general.
For more detail please kindly contact: michelle.huynh@suntransco.com
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