Houthi gains deepen risk as carriers restore Red Sea services

Red Sea capacity returns

Despite some shipper pushback and the heightened security threat, carriers are increasing transits through the Red Sea and Suez Canal, particularly on Asia-Mediterranean services.

Sea Intelligence estimates that more than one-quarter of Asia-Europe capacity will transit the Red Sea in September. The return is most pronounced on the Asia-Mediterranean trade, where roughly 35% of headhaul capacity and 50% to 60% of backhaul capacity are expected to move through Suez.

The restoration is proceeding more slowly on Asia-North Europe services. About 6% of headhaul capacity and 30% of backhaul capacity had returned to the route, according to the estimates.

The shift is significant because the Suez route shortens voyages relative to diversions around Africa. A faster transit improves effective vessel capacity, reduces the number of ships required to sustain a weekly network and can ease schedule pressure — provided the security situation holds.

Analysts have estimated 2 million container units’ worth of capacity could return to the Mideast trade lane.

Asia-Europe spot rates fall

The expanding use of the Red Sea route, combined with easing demand after the peak shipping season, appears to be weighing on Asia-Europe container prices.

Asia-North Europe spot prices fell 3% last week to about $4,300 per forty foot equivalent unit (FEU), while Asia-Mediterranean rates dropped 12% to roughly $4,200 per FEU. Daily pricing on both lanes had eased to approximately $3,800 per FEU so far this week.

The sharper decline on the Mediterranean trade may reflect its larger Red Sea capacity restoration. Asia-Mediterranean prices have fallen about $3,000 per FEU from their July peak, compared with a roughly $2,000-per-FEU decrease for Asia-North Europe rates.

Still, rate levels remain elevated. Asia-North Europe pricing is more than 20% above pre-peak-season levels from mid-May, while Asia-Mediterranean prices remain more than 50% higher, according to the data in the market update.

That resilience points to persistent operational constraints despite the return of some Suez routings. Higher war-related fuel costs and congestion at Far East load ports continue to strain schedules, while poor on-time performance and shipment backlogs could remain factors after China’s Golden Week holiday and into October.

Congestion at North European hubs may also be influencing carriers’ willingness to return to the Red Sea. The shorter routing can help lines regain schedule time and deploy their fleets more efficiently, even as terminals and inland networks remain under pressure.

Trans-Pacific rates remain firm

On the trans-Pacific, spot rates edged higher last week and remain near peak-season levels.

Strong import demand, coupled with congestion in Asia, is continuing to support pricing. But the latest National Retail Federation outlook projects U.S. ocean import arrivals will decline 9% in October from September, followed by another decrease in November, evidence that cargo demand may already be beginning to retreat.

Lower demand alone may not produce a rapid correction in freight rates. Continued port congestion and carrier blank sailings during the holiday period could constrain available capacity enough to keep pricing comparatively high even as volumes soften.

Most carriers do not appear to be preparing broad October general rate increases, though CMA CGM has announced significant peak-season surcharges, particularly on South Asia-to-U.S. trades.

Why it matters: Carriers are regaining the shorter Suez route at the same time that the route’s southern gateway is becoming more vulnerable.

Read more articles by Stuart Chirls here.

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