Red Sea return: Freightos sees full recovery in Q1 2027

The News

Freightos expects Red Sea traffic to fully recover during Q1 2027 as container lines steadily move services back through the Suez Canal, according to its weekly update.

Suez handled 94 container ships in the latest week, up from 74 a year earlier, according to IMF PortWatch.
A completed return “increases the overcapacity risk for carriers in 2027,” Freightos said.

The details

Carriers have doubled the capacity they schedule through the Red Sea in six weeks, while ship counts at its southern end remain below last year.

Offered capacity through the Red Sea reached 448,273 TEU, double its level in late August, wrote Emily Stausbøll, senior shipping analyst at Xeneta. That is 48% of the 930,679 TEU offered in Aug 2023.
The doubling “indicates a major shift in strategy from carriers,” she wrote. “Only carriers can answer what has changed in security assessments in the last six weeks.”
Bab el-Mandeb, the strait off Yemen on the route to Asia, saw 33 container ships in the latest week, down from 46 a year earlier and about 140 a week in Oct 2023, per PortWatch.

Ships are back at Suez first, but not yet through the southern strait

US East Coast importers pay the most for the long way around. Their spot rates run more than three times Europe’s. Xeneta expects the gap to close mainly from the US side.

Xeneta put Far East to US East Coast spot at $11,495 per FEU, against $3,568 to North Europe.
Freightos’s Asia to US East Coast index stood at $9,700 per FEU, up 1% on the week.
When the spread narrows, “it will be driven by rates into the US falling and to a much smaller degree Europe strengthening,” Stausbøll wrote.

Carriers are pulling sailings and announcing increases as contract talks open. Both firms read the moves as efforts to hold up rates.

Carriers blanked 58,200 TEU from the Far East to the US West Coast and 35,500 TEU to the East Coast in a single week, per Xeneta. “This looks like the behavior of carriers who don’t believe the market will hold,” Stausbøll wrote.
Freightos says recent general rate increases aim to pressure rates “as 2027 long term contract negotiations get underway,” and that some forwarders doubt “that increases will stick.”

Freightos puts the capacity at stake above two million TEU, and Xeneta expects congestion to absorb some of it. Freightos expects a gradual return, which limits the ship bunching that could push rates up for a time.

A full return would “release more than two million TEU of container capacity” once flows stabilize, Freightos reports, citing a JPMorgan estimate that the diversions absorbed about 9% of global container capacity.
The released capacity “will also be partially absorbed by the current congestion in global ocean networks,” Stausbøll wrote.
The diversion added seven to 10 days to Asia to Europe voyages, per Freightos.

My notes

Schedules and ships disagree. Xeneta counts what carriers put on their schedules, and PortWatch counts ships that pass. Schedules doubled while Bab el-Mandeb traffic is below last year, so the return is mostly a plan so far. The strait count will show when ships come back.
Why Suez can rise while the strait falls. I think part of the Suez gain is ships calling at Red Sea ports and turning back north. A Suez number alone doesn’t prove Asia services are through.
Who has leverage at bid time. East Coast importers. Their rates are three times Europe’s, Xeneta expects the gap to close from the US side, and two million TEU could come back during the same months contracts get signed.
What the blank sailings say. I think carriers cancel sailings to protect price. Xeneta read this week’s cuts that way, and general rate increases during contract season serve the same purpose.
Congestion sets the pace. Freightos expects a gradual return that avoids bunching, and Xeneta expects congestion to soak up part of the freed capacity.