Approximately 15% of global trade and roughly 30% of global container traffic passes through the Red Sea region via the Suez Canal every year. We saw how crucial that region was back in March 2021 when a ship blocked Suez Canal trade for six days. Even though that lasted only six days, its effects on the shipping industry were massive, creating a huge bottleneck impacting global supply chains.
It has been more than two years now that carriers adapted their fleets to the new situation where 95% of the ships are now using the Africa route compared to the Red Sea route. It is also an interesting fact that even though the Houthis announced they will not be targeting Chinese carriers, Cosco and OOCL are still avoiding the Red Sea route, not taking any chances.
Shippers have been slow to return to the Red Sea even after violence largely ended.
Even though there has been a peace process started for couple of weeks now in the Middle East, it still looks fragile and shipping companies are still not taking any chances by deploying vessels there yet. They need assurances to satisfy the safety of their crew as well as their insurance parties.
The below data shows the latest per-carrier transit figures from the Suez Canal where CMA and  Maersk vessels are the most affected so far.
Looking ahead to 2026 and beyond
When we look at the order book for 2026, we see that it is at a record high where over 10 million TEUs of new vessels are coming onto the market. This translates into roughly 3.6% of global fleet capacity and when we look at exposure, we see that 22% of the new capacity will be added just by MSC putting great amount of pressure to fill their vessels. When we look at these figures by alliances, we see that Ocean Alliance carriers will have around 34% of the new vessels coming in. Another change will be in the rankings where CMA is expected to be the number three global shipping player to take over Maersk due to these changes.
I believe at this point, it is safe to say that demand for 2026 will not be as high as previous years, both due to effects of tariffs as well as the inflation putting pressure on consumer spending. With the 3.6% extra vessel supply with less than 3% demand will probably mean lower freight rates where carriers will be competing for the shrinking pie. This is, of course, without the carriers switching the vessels from the Cape of Good Hope Africa route to the Red Sea again.
What shipping companies will do next to adapt
Shipping companies must act together and do the switch gradually when they feel that it is safe to go back to the region. The main reason is it will be devastating if all goes to this route at the same time flooding the trade with overcapacity causing the shipping rates plunging. Per some estimates, shipping rates may be around 25% or so lower in 2026 than 2025 where the shipping rates have been at their lowest point compared to the start of the pandemic.
In short, carriers had a good and extended run for the last couple of years with record profits. However, with both the large number of order book ships coming in the next year or so and global demand is slowing with the tariff war, they have to be extra careful in terms of capacity management and going back to the Red Sea route.
