Trump conundrum: box shipping, a Houthi ceasefire and tariff-thrashed trade

How freight rates might respond to a return to Red Sea and Suez transits

For ships considering a return to Red Sea routes, container shipping analysts Xeneta say a shift in trade flows, en masse, away from the fuel and time-consuming trip around Africa could result in freight rates plummeting.

"The prospect of a largescale 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," Xeneta said.

But, as Xeneta points out, "the situation remains far from certain".

According to Xeneta, global TEU-mile demand – the number of 20-ft equivalent container units (TEU) and the average distance travelled – would drop by 6% if container ships begin sailing through the Red Sea and Suez Canal again instead of diverting around the Cape of Good Hope. The projection is based on overall container shipping demand growth of 1% in 2025 with a largescale return of container ships to the Red Sea in the latter half of the year.

The compounding impact of a trade war on an oversupplied box shipping sector

The press conference during which US President Trump announced the ceasefire arrangement with the Houthis came during a meeting with Canadian Prime Minister Mark Carney in the White House, ostensibly about trade and tariffs, an economic negotiating lever that the US president has wielded bluntly and repeatedly since he took office for his second term in January 2025. 

According to Xeneta, the combined impact of a return to Red Sea and Suez routes and a continued trade war that has slowed trade and driven downbeat projections for international trade-led markets could have a compounding deleterious effect on container shipping rates.

“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," Xeneta chief analyst Peter Sand said.

Mr Sand said while the possibility of a rate collapse exists, there is a significant degree of complexity involved in container shipping returning to the Suez Canal that mitigates the threat.

“The announced ceasefire plan between Israel and Hamas in February raised restrained hopes of a return of container shipping to the Red Sea but data shows no increase in transits through Bab el-Mandeb Strait or the Suez Canal during 2025," he said. "Carriers need assurances over the long-term safety of their crew and ships, let alone customers’ cargo. Perhaps even more importantly, so do insurance companies. We also know Houthi militia will continue to attack some ships because they stated very clearly the ceasefire agreement is with the US and does not include Israel."

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