Even Suez Canal restart is no silver bullet for container shipping turbulence, warns Jensen

Shippers should anticipate continued volatility in container shipping freight markets through 2025, with even the re-start of operations through the Suez Canal not guaranteeing immediate respite from disruptions and soaring freight rates, according to Lars Jensen, CEO of Vespucci Maritime.

The renowned container shipping analyst and consultant outlined various Red Sea crisis scenarios on the latest episode of The Freight Buyers’ Club podcast.

Jensen argued that if the Red Sea crisis continued and a significant portion of the global container shipping fleet was forced to continue diversions around southern Africa, global capacity would remain constrained and vulnerable to further shocks.

However, even if peace were surprisingly achieved in the Middle East and Houthi attacks on global trade ceased, he noted it would still take a substantial period before liner networks could adjust.

“If you're a freight buyer and you want stability, you need to find a new job,” Jensen stated on The Freight Buyers’ Club, produced with the support of Dimerco Express Group (see video hereavailable for publication).

“The challenge is that the most likely scenarios ahead of us for the next 18 months are fairly extreme. The scenario with the lowest likelihood is a stable scenario.”

More likely, according to Jensen, is an extended Red Sea crisis resulting in “continued high freight rates” and “high volatility”.

A resolution of the crisis allowing ships to restart transits of the Suez Canal would bring about huge excess capacity but might not immediately cause a freight rate crash.

“The first thing that will happen when it reopens is we're going to see a lot of ships take the shortcut up to Europe, overtaking the ones going around Africa,” explained Jensen. “So, the consequence of solving the Red Sea crisis is massive port congestion in Europe, which would then impact all other services coming into Europe from Africa, from Latin America and from North America.

“And it's only when we work through that port congestion that market rates will come down relatively rapidly.”

The most likely scenario in 2025

Jensen added that assuming the Suez Canal remains closed to most container shipping vessels and global supply chains do not suffer further shocks, contract and spot rates will likely soften in 2025.

He predicted “the usual build-up to Chinese New Year” in the first quarter of next year but noted that Q3 peak season rates will not be as high as current levels due to record deliveries of new vessels continuing at heightened volumes over the next 12 months.

“Between now and peak season 2025, we will still have a lot of additional vessels that are being delivered,” he said. “So, the baseline expectation shippers should have is that we are coming out of the worst of it. Barring any calamities, rates will abate and go down.

“They'll of course go up again next year in peak season, but not to the highest levels we have seen in summer 2024. But they're also not going to collapse back down to the extremely low levels that we saw towards the end of 2023.”