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This week, shipping analyst Drewry noted that the return of ships through the Suez Canal following the ceasefire agreement between Israel and Hamas was unlikely in the short to medium term. Despite the Houthis issuing a statement saying it will stop attacks on all non-Israeli-linked commercial shipping, Drewry estimates that carriers will not rush to the canal for geopolitical and economic reasons. Drewry pointed out that the ceasefire remains fragile, and any breakdown could provide the Houthis with justification to resume missile attacks. The analyst also questioned the underlying motives for halting the attacks, noting their previous effectiveness in yielding significant monetary and strategic influence.

Additionally, it is expected that major carriers would not want to disrupt the ongoing implementation of the new alliances structure on the East-West networks: A return to the Suez Canal will very quickly see carriers forced to address the underlying overcapacity that exists in the market, but which was masked to a large degree by the Red Sea diversions, by adding distance and time to voyages. An ordering frenzy for new container ships in 2021-22 (which recurred in 2024) has made the situation even more acute as those large capital investments are hitting the water and entering service.

The analyst anticipates that once carriers consider the Suez route to be safe again, we can expect a concerted effort to aggressively cut capacity. This is likely to include significantly increased scrapping (last year, only 85,000 TEU of the 31 million TEU fleet was scrapped), more extensive use of blank sailings, and longer-term idling (currently, only 2.6% of container ships are anchored). These measures could influence freight rates, which have been steadily declining since the ceasefire announcement. However, Drewry suggests that carriers possess various tools to manage capacity effectively, maintaining a floor on the supply/demand balance to prevent rates from falling too sharply.

Source: Drewry