International Maritime
Resuming Suez Canal transits would release 6 % to 8 % of global container ship capacity . Shutterstock . com
Downward pressure on spot rates
Alan Murphy , CEO of Sea-Intelligence Maritime Analysis , said in his Sunday Spotlight newsletter that a return to transits through the Red Sea would be good news for shippers and consumers , but bad news for carriers .
“ It is hard to see any other outcome than a rapid decline back toward the depths seen in 2023 .”
“ The high freight rates are clearly supported by the severe capacity absorption from the round-Africa services as a consequence of the Red Sea crisis ,” he wrote . “ A reversal back to Suez would bring the global supply-demand balance back to the level we saw toward the end of 2023 . This in turn means that — after a somewhat turbulent period with port congestion issues in Europe — spot rates will drop sharply .”
Average Asia-North Europe spot rates in the last week of November 2023 were $ 1,379 per FEU , according to rate benchmarking platform Xeneta . By mid-July 2024 the rate
www . joc . com peaked at $ 8,558 / FEU , and although falling through the second half , the spot rate has remained more than double the price recorded in November 2023 .
A return to the shorter voyages through the Red Sea will dramatically change the supply-demand picture and put significant downward pressure on rates , Peter Sand , chief analyst at Xeneta , wrote in a Jan . 20 report .
“ Combined with record deliveries of new ships , the market will be flooded with capacity , with carriers needing to remove around 1.8 million TEUs to retain the status quo ,” he said .
“ Scrapping of ships will increase and carriers have become much better at capacity management in recent years , but it is unlikely this will be enough to prevent freight rates from collapsing ,” he added .
Carriers have been playing down the impact of overcapacity following the resumption of Suez transits , pointing to an increase in scrapping , which has been close to zero for the last few years , and the ability to slow steam ships that have been at full speed since the diversions began .
Still , Murphy said from a supply-demand perspective , “ it is hard to see any other outcome than a rapid decline back toward the depths seen in 2023 . At least for a temporary period ,” he noted , adding that the market drop after the Suez route ’ s reopening would not be a “ soft landing .”
email : greg . knowler @ spglobal . com
February 3 , 2025 | Journal of Commerce 23