The ships are moving. Faster than expected, some say.
And why wouldn’t they? Paying a premium to get cargo through the Suez Canal, bypassing the pirate-infested waters of the Red Sea, is a bargain when compared to the time lost rerouting. CMA CGM, the big dog, is already doubling down on Suez transits. Rivals, naturally, are watching. And likely following. It’s a race back to normalcy, or at least, what passes for it.
But here’s the rub. This “full employment” everyone’s crowing about? It’s a house of cards. Braemar analyst Jonathan Roach, bless his clear-eyed soul, is telling anyone who’ll listen that much of this strength is borrowed. Borrowed time, borrowed capacity. And that borrowed time is running out.
Is a Suez Canal Return Really a Bad Thing?
Look, the rerouting around Africa is a drag. It ties up ships longer, consuming more capacity than a straight shot through Suez. That’s been the artificial leg holding up the whole shaky edifice of current rates. But what happens when the Houthi rebels decide to take a coffee break? Or when the geopolitical tensions that are currently propping up this fragile market decide to evaporate?
That’s the “release valve” Roach keeps harping on. A sudden return to Suez transits, a snap back to pre-disruption routes, would dump all that temporarily absorbed capacity back into the system. Instantly. And the market, which has been feasting on scarcity, would choke on abundance. Suddenly, the headlines about full employment will look like a bad joke.
“That is propping the market up – but it is not a permanent fix,” Mr Roach said, warning that a faster-than-expected return to normal Suez transits could trigger a sudden capacity surge, which would be “a release valve opening, and the market would feel it quickly”.
And let’s not pretend the carriers are in any rush to get back to business as usual just yet. Peter Sand over at Xeneta points out they’ve got enough on their plates. Houthi rebels are just the appetizer. You’ve got tariff wars brewing, and the ongoing mess in Ukraine. A full-scale return to predictable routes? That only happens when it’s genuinely safe and settled. Right now, it’s anything but.
Why is China Pivoting Eastward?
Meanwhile, China is doing its own thing. Facing down those pesky US tariffs, they’re busy carving out new export markets. South America, Africa, the Indian subcontinent, the Middle East. These aren’t quick hop-skip-and-jumps. These are long hauls, complex routes that chew up more vessel time per unit of cargo. It’s adding real ton-mile demand. This might just be the buffer many don’t expect, soaking up some of the newbuild tonnage lumbering into service.
But don’t get too comfortable. Even with China’s eastward expansion, demand growth is forecasted to be sluggish. Think 2% to 4% annually. That’s not exactly a roaring fire to keep pace with the sheer volume of new ships slated to hit the water between 2026 and 2028. We’re talking a tsunami of capacity.
When Will the Oversupply Hit?
2026 might still feel relatively firm. The current disruptions are doing the heavy lifting, keeping things tight. But 2027? That’s when the gears start to grind. By 2028, oversupply won’t be a prediction; it’ll be the stark, unvarnished reality. And when that happens, rates will tumble, and idle ships will start to gather dust.
And it won’t be pretty for everyone. The big boys, those behemoths above 7,500 TEU, will feel the pinch first. They’re the ones that push smaller vessels down the pecking order. But the mid-range ships, the 4,000 to 7,500 TEU crowd? They’re the ones caught in the vice. Squeezed from above by the giants, and shoved into the feeder trades from below.
Feeders and regional vessels, the little guys under 4,000 TEU, have a bit more insulation, thanks to steady regional demand. But even they won’t be immune forever, especially the older, less efficient units. As conditions sour, they’ll become increasingly vulnerable. So, while the current market feels tight, remember: it’s a temporary reprieve. The real storm is brewing, and it’s only a matter of time before that release valve blows.
