Potential Return of Container Ships to Red Sea Following US-Houthi Ceasefire Could Collapse Freight Rates

May 8, 2025

Data released by Xeneta shows global TEU-mile demand would decrease 6% if container ships begin sailing through the Red Sea and Suez Canal again instead of diverting around the Cape of Good Hope. Credit: Xeneta
Data released by Xeneta shows global TEU-mile demand would decrease 6% if container ships begin sailing through the Red Sea and Suez Canal again instead of diverting around the Cape of Good Hope. Credit: Xeneta

The prospect of a large scale return of container ships to the Red Sea following the announcement of a ceasefire between the US and Houthi militia in Yemen would flood the market with shipping capacity and cause a global collapse in freight rates, but the situation remains far from certain.

Data released by Xeneta, an ocean and air freight intelligence platform, shows global TEU-mile demand would decrease 6% if container ships begin sailing through the Red Sea and Suez Canal again instead of diverting around the Cape of Good Hope.

TEU-mile demand factors the distance each 20ft equivalent container (TEU) is transported globally as well as the number transported. The 6% is based on global container shipping demand growth of 1% for full year 2025 and a large scale return of container ships to the Red Sea in H2.

“Of all the geo-political disruptions impacting ocean container shipping in 2025, conflict in the Red Sea continues to cast the longest shadow, so any meaningful return to the region would have massive consequences," said Peter Sand, Xeneta Chief Analyst. “Container ships returning to the Red Sea would flood the market with capacity with the inevitable outcome of collapsing freight rates. If we also see a continued slowdown in imports into the US due to tariffs, then the collapse will be even harder and even more dramatic.”

Average spot rates from the Far East to North Europe and Mediterranean are USD 2100 per FEU (40ft container) and USD 3125 per FEU respectively. This is an increase of 39% and 68% compared to pre-Red Sea Crisis levels on 1 December 2023.

From the Far East to US East Coast and US West Coast, spot rates stand at USD 3715 per FEU and USD 2620 per FEU respectively. This is an increase of 49% and 59% compared to pre-Red Sea Crisis.

While Sand believes spot rates could collapse back to pre-Red Sea Crisis levels, he has warned the situation remains volatile and requires a sense of reality on the complexity involved in container ships returning to the Suez Canal. “Carriers need assurances over long term safety of their crew and ships, let alone customers’ cargo. Perhaps even more importantly, so do insurance companies."

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