Freight News, Sea


Container rates could collapse – if Houthi ceasefire holds

[ May 8, 2025   //   ]

The reported ceasefire between the US and Houthi militia in Yemen could cause a collapse in freight rates says analyst Xeneta but it added that the situation remains far from certain.

It said that the prospect of a large scale return of container ships to the Red Sea following the cessation of missile attacks could decrease global container demand by 6% if container ships begin sailing through the Red Sea and Suez Canal again in the second half of 2025 instead of diverting around the Cape of Good Hope.

Xeneta chief analyst Peter Sand said: “Of all the geo-political disruptions impacting ocean container shipping in 2025, conflict in the Red Sea continues to cast the longest shadow, so any meaningful return to the region would have massive consequences.

 “Container ships returning to the Red Sea would flood the market with capacity with the inevitable outcome of collapsing freight rates. If we also see a continued slowdown in imports into the US due to tariffs, then the collapse will be even harder and even more dramatic.”

Current average spot rates from the Far East to North Europe are US$2,100 per FEU (40ft container), an increase of 39% compared to pre-Red Sea Crisis in December 2023.

From the Far East to US East Coast and US West Coast, spot rates stand at $3715 per FEU and $2620 per FEU respectively, increases of 49% and 59% respectively.

Sand said: “Carriers have capacity management strategies to keep rates elevated, such as blanking sailings when demand falls. But the amount of capacity that will flood the market following a return to the Red Sea, combined with a downturn in global container demand due to tariffs and high deliveries of new vessels, would require capacity management at an altogether different order of magnitude – or another major black swan event – to stop freight rates falling to a level that puts carriers in a loss-making position.”

However, he warned that the situation remains volatile and returning  ships to the Suez Canal would be complex.

“Carriers need assurances over long term safety of their crew and ships, let alone customers’ cargo. Perhaps even more importantly, so do insurance companies. We also know Houthi militia will continue to attack some ships because they stated very clearly the ceasefire agreement is with the US and does not include Israel.

He also pointed out that carriers would not want to go through the disruption of restoring schedules to the Suez Canal only for the situation to and having to re-introduce diversions around the Cape of Good Hope.

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