Return to Suez puts pressure on container rates

Global container freight rates are broadly stable this week, but pricing pressure is increasing on the key Asia-Europe trade lane. More shipping lines are cautiously returning to the Suez Canal, effectively bringing additional capacity back into the market. At the same time, demand for container space remains moderate. However, escalating tensions around the Strait of Hormuz pose a significant geopolitical risk.The Drewry World Container Index (WCI) remained unchanged for the second consecutive week at $4,476 per 40-foot container. Behind this stable average, however, there are differences between individual trade lanes. Rates on trans-Pacific routes edged higher, while shipping from China to Europe became cheaper.The Shanghai-Rotterdam rate fell by 2% this week to $3,997 per 40-foot container. Shanghai-Genoa dropped by 3% to $4,216. This means the downward trend on the Asia-Europe trade continues. Drewry nevertheless expects little further movement in rates next week.More capacity via SuezAn important development for the European container market is the gradual normalisation of shipping through the Red Sea and the Suez Canal. Several shipping lines have now rescheduled services via Suez. COSCO is also shifting several sailings back to this route.For the time being, this is mainly happening on return voyages from Europe to Asia, although the shorter route is also being used again on some services heading towards Europe. According to container shipping analyst Lars Jensen, capacity on the Asia-Europe trade, measured on the headhaul leg towards Europe, has now normalised by around 28%. On the return leg, the figure is approximately 37%.This is important for container freight rates. The diversion around the Cape of Good Hope keeps vessels occupied for longer and therefore effectively removes capacity from the market. As more vessels return to the Suez route, sailing times are reduced and capacity is released. With demand remaining moderate, this puts clear downward pressure on freight rates.Shipping lines manage capacityThis does not mean that rates will continue to fall unchecked. Shipping lines continue to actively manage available capacity by cancelling sailings. Three so-called blank sailings are scheduled on the Asia-Europe trade next week, compared with one this week. By doing so, shipping lines are trying to keep supply and demand more closely balanced.Congestion at Asian ports also remains a factor. The situation in Shanghai has improved, however. According to Drewry, average delays fell from 94 hours in week 35 to 64 hours in week 36. The combination of port congestion and cancelled sailings may still result in shortages on individual sailings, even though sufficient capacity is available across the market as a whole.This picture is also reflected in market data. According to Container Trades Statistics, global container demand increased by 4.5% year on year in July. Growth is very unevenly distributed, however. Volumes on the main headhaul routes also increased by 4.5%, while regional container traffic grew by 8.1%. Volumes on return routes, by contrast, declined by 1.7%.Hormuz remains a major riskAgainst the somewhat calmer backdrop in the container market, tensions around the Strait of Hormuz have escalated sharply. Several tankers have reportedly been attacked again in recent days, further increasing tensions between the United States and Iran.For container shipping, the direct impact remains more limited than for the tanker market. In the latter, the consequences are already substantial. According to the Baltic Exchange, the daily rate on the key route for very large crude carriers from the Middle East to China is approaching $800,000.A further escalation of the conflict could also have consequences for container shipping. This would not only affect vessels sailing through the region, but could also lead to higher fuel, insurance and security costs. Hormuz therefore remains an important upside risk for logistics costs.