The recent agreement between Israel and Hamas to pause hostilities has raised hopes that container ships may soon return to the Red Sea.
However, the situation remains complex, and a large-scale return of vessels is far from certain, warns Xeneta’s chief analyst, Peter Sand.
While diversions around the Cape of Good Hope are costly and inefficient, the shipping industry has managed to stabilize operations.
Carriers will be reluctant to revert too quickly, fearing that the situation in the Red Sea could deteriorate again.
“It took months and extreme disruption to achieve this stability,” says Sand. “If carriers rush back and the conflict reignites, they’ll be back to square one.”
As a result, several shipping lines have prepared two service plans for 2025—one maintaining Cape of Good Hope diversions and the other routing vessels through the Red Sea.
Carriers are expected to reintroduce Red Sea transits cautiously. Initially, smaller vessels (under 10,000 TEUs) will test the route, with larger 18,000–24,000 TEU containerships phased in gradually. This transition could take one to two months before schedules stabilize.
However, shippers should brace for disruption once Red Sea transits resume.
“Ships will not be where they are supposed to be, arriving at ports much earlier or later than scheduled,” Sand warns. “If too many vessels arrive at once, ports will face severe congestion, rippling across global supply chains.”
A shift back to Red Sea shipping will significantly impact freight rates. Spot rates are expected to be highly volatile but will trend downward as capacity floods the market.
Even with an expected 3% growth in global shipping volumes in 2025, TEU-mile demand could drop by 11% compared to 2024 if ships return to the Red Sea.
Combined with record new vessel deliveries, carriers may need to remove 1.8 million TEUs from circulation to maintain pricing stability.
For shippers, falling rates could be beneficial, but locking in long-term contracts now is risky. If market rates collapse, those who commit to current pricing could overpay, losing a competitive edge. On the other hand, uncertainty over Red Sea stability gives carriers an argument to keep rates high.
For now, the only certainty in global shipping is continued uncertainty.
