# The Suez Canal is open again: the weird reason the global shipping industry doesn't want to use it. Source: https://www.youtube.com/watch?v=Cl2Yb9Shabc Recap page: https://rapidrecap.app/video/Cl2Yb9Shabc Generated: 2025-11-28T15:03:43.191+00:00 --- ## 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). ![Screenshot at 01:19: Map illustrating the significant distance difference between the Suez Canal route \(6,480 nautical miles, 14 days\) and the longer route around Africa \(11,300 nautical miles, 28 days\), highlighting why carriers prefer the Suez when safe.](https://ss.rapidrecap.app/screens/Cl2Yb9Shabc/00-01-19.png) **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. ## Detailed Analysis The video explains the current reluctance of the global shipping industry to fully utilize the reopened Suez Canal despite the geopolitical situation being temporarily eased by a reported peace deal (03:31). Shipping companies prefer to keep using the longer route around Africa because a sudden, large-scale return to the Suez Canal would immediately introduce 10-12% more capacity into the international shipping market (04:37). This excess capacity would flood the market, causing freight rates, which had already dropped by over 50% on key Asia-Europe routes since the start of 2024 (03:27), to plunge even lower, pushing carriers into loss-making territory (03:54, 04:55). Evidence is presented showing financial strain: Hapag-Lloyd reported a 50% drop in nine-month net profit, even though their transported volumes increased by 9% (05:30). Maersk's CEO confirmed they do not expect a normal return to the Red Sea soon (04:58). Data from PortWatch confirms this trend, showing vessel traffic through the Bab al-Mandeb Strait is less than half of what it was before the diversions began (05:01). Therefore, carriers are cautiously holding capacity outside the Suez route to avoid destroying the high rates they achieved during the crisis. ### Suez Canal Reopening & Carrier Hesitation - Suez Canal is open tentatively, but shipping companies avoid it because a full return would flood the market with capacity - This capacity influx would cause freight rates to plunge even lower than current levels - Carriers fear returning to loss-making territory (02:21 - 03:54 - 04:55) ### Financial Impact on Carriers - Hapag-Lloyd saw a 50% drop in nine-month net profit despite a 9% rise in transported volumes (05:30 - 05:53) - Maersk CEO stated they do not expect a normal return to the Red Sea in the near term (04:58) ### Traffic Data & Outlook - PortWatch data shows Bab al-Mandeb Strait traffic is less than half the November 2023 level (05:01) - Freight rates have already fallen by over 50% on major routes since early 2024 (03:27) - Carriers are already anticipating rates falling up to 25% globally by 2026 (04:55) ![Screenshot at 00:18: Graphic showing the importance of the Suez Canal: 12% of global trade is handled by it, with 18,000 ships passing through annually.](https://ss.rapidrecap.app/screens/Cl2Yb9Shabc/00-00-18.png) ![Screenshot at 00:32: Screenshot of a BBC article titled 'Search for survivors after Houthis sink second Red Sea ship in a week', illustrating the initial security threat.](https://ss.rapidrecap.app/screens/Cl2Yb9Shabc/00-00-32.png) ![Screenshot at 01:19: Map comparing the Suez Canal route \(shorter, 14 days\) versus the route around Africa \(longer, 28 days\), highlighting the time savings offered by the canal.](https://ss.rapidrecap.app/screens/Cl2Yb9Shabc/00-01-19.png) ![Screenshot at 04:55: Bullet points from a Bloomberg report detailing the negative financial outlook for carriers, noting falling spot rates and expected long-term rate drops.](https://ss.rapidrecap.app/screens/Cl2Yb9Shabc/00-04-55.png) ![Screenshot at 05:30: Reuters snippet showing Hapag-Lloyd's nine-month net profit dropped 50% to 846 million euros, despite a 9% increase in transported volumes.](https://ss.rapidrecap.app/screens/Cl2Yb9Shabc/00-05-30.png)