Long Red Sea crisis would absorb shipping overcapacity

Significance

The capacity of the global container fleet grew by 7.9% last year but demand for container shipping was flat, triggering a cyclical downturn and a sharp drop in freight rates. All carriers are likely to have made losses in the fourth quarter of 2023.

Impacts

• Importers are increasingly switching to a China-plus-one sourcing strategy, causing especially high traffic in the Indian subcontinent.
• Container carriers are expected to launch new routes serving the Indian subcontinent directly.
• The Panama Canal now allows 24 vessels through daily after more rain recently, but this is still well down on the 2022 average of 35.5.
• Prolonged disruption at the Suez and Panama canals will push firms to consider permanently rerouting their supply chains.
• Efforts to unblock the Red Sea will intensify as trade tends to surge before Lunar New Year, which sees China’s factories shut for 15 days.