The Suez Canal is open again: the weird reason the global shipping industry doesn't want to use it.

Quick Overview

Container shipping companies are hesitant to immediately resume using the Suez Canal route despite its reopening because the massive capacity influx from rerouted ships would cause freight rates to plummet, potentially leading to losses for carriers who have profited significantly during the diversion period.

Key Points: Shipping companies are avoiding the Suez Canal route, preferring the longer route around Africa, because a full return would flood the market with capacity, causing freight rates to plunge even lower than current levels (02:21). Average spot rates for key trades (Far East to North Europe, Mediterranean, and U.S. East Coast) have already fallen by over 50% since the start of 2024 due to diversions (03:27). If shipping fully returned to the Red Sea, it would be like pumping 10-12% more capacity into the international shipping market, putting significant downward pressure on rates (04:37). Hapag-Lloyd, a major German shipper, reported a 50% drop in nine-month net profit to 846 million euros, despite a 9% increase in transported volumes (05:30, 05:53). Maersk's CEO stated the company does not expect a normal traffic return to the Red Sea in the near term (04:58). PortWatch data shows the seven-day moving average number of vessels transiting the Bab al-Mandeb Strait was 31 on Sunday, less than half the traffic level seen in November 2023 (05:01). Carriers are already heading into loss-making territory, with freight rates expected to fall up to 25% globally in 2026, regardless of the Red Sea situation (04:55).

Context: The video discusses the current dilemma facing the global ocean freight industry following the reopening of the Suez Canal after Houthi attacks caused significant disruptions. While the canal is technically open, shipping companies, which enjoyed record profits due to capacity shortages caused by rerouting around Africa, are reluctant to immediately switch back. This hesitation stems from the fear that a rapid return to the shorter route would flood the market with excess vessel capacity, crashing freight rates they have benefited from.