The ongoing conflict in the Middle East is reshaping the container shipping sector, particularly in light of disruptions in the Red Sea, which have absorbed vessel capacity and tightened freight markets more than expected. Jonathan Roach, a container market analyst at Braemar, indicated that geopolitical factors are increasingly influencing the balance of supply and demand within this industry. Current projections suggest a global container fleet expansion of approximately 4% for 2023, with rates expected to rise to 8% in 2027 and potentially 12% in 2028 as new vessels from a significant order book enter service, raising concerns about overcapacity.
In a previous market outlook, Braemar anticipated that carriers would resume Suez Canal transits in the first half of 2026, but escalating regional conflicts have caused uncertainty regarding this timeline. Roach noted that if Red Sea diversions persist, normal Suez transits may not resume until 2027. Increased voyage distances are likely to enhance vessel utilization and prolong transit times, mitigating the impact of incoming deliveries on effective fleet capacity.
Under typical circumstances, Braemar projected an industry overcapacity of around 14% for this year, increasing to 20% in 2027 and up to 30% by 2028. However, if the Suez Canal remains largely underused, the effective oversupply could be significantly reduced. Rerouting vessels around the Cape of Good Hope could lower effective overcapacity estimates to about 5% in 2023, 11% in 2027, and around 22% in 2028.
The surge in new vessel orders post-pandemic may also prove strategically beneficial, as more ships are required to maintain service frequency during longer voyages. Roach emphasized the likelihood that the Middle Eastern conflict will continue to affect the container shipping sector through 2026. According to Peter Sand, chief analyst at Xeneta, the latest hostilities have already shifted market dynamics in favor of carriers, who are now better positioned to manage freight rates in the short term.
Share it now
