The shipping industry is expanding blank sailings (temporarily suspending ship operations) and reorganizing routes to cope with weak market conditions driven by structurally low freight rates and the risk from the resumption of Suez Canal transits. At the same time, it is steadily increasing capacity in preparation for the next boom cycle.
If Suez Canal transits resume and ton-miles (the product of cargo weight and distance traveled) decrease, freight rates are likely to fall. But the industry believes it will not lead to a crisis like the 2015 rate downturn and is seeking to scale up to boost competitiveness.
According to Drewry, a shipping market analysis firm, on the 27th, the number of blank sailings that carriers worldwide have decided on or announced on major routes this month totals 75. That is an increase of more than 50% from the same period last year. The firm also said carriers have so far decided to cancel 35 sailings in January next year.
Along with the rise in blank sailings, the industry is also overhauling routes. The Premier Alliance, the shipping alliance that includes HMM, said on the 15th that it will revamp the Asia-North Europe route by cutting the number of calls on the FE3 service from 11 to 8 and on the FE4 service from 13 to 5. The Gemini Alliance and Ocean Alliance, other shipping alliances, have also decided to reduce some services.
Carriers are taking these steps to cut expense and improve efficiency as ocean freight rates move sideways at low levels. The Shanghai Containerized Freight Index (SCFI), the benchmark for major routes based in Shanghai, stood at 1,656.32 as of the 26th. It rose 6.7% from the previous week, extending gains, but was 32.7% lower than the same period last year.
After hitting the 5,000 level during the COVID-19 period when cargo demand surged, the SCFI trended down, then climbed for a time after the Red Sea crisis broke out late last year. It then turned lower again, averaging 1,581.34 this year. That is 36.9% below the figure for the same period last year.
This decline in rates is occurring because the delivery of newbuilds ordered by carriers during the COVID-19 boom has significantly increased supply relative to demand. Container ship throughput, which was 246 million TEU (1 TEU = one 20-foot container) last year, is expected to rise 3.5% to 255 million TEU this year and increase to 278 million TEU by 2028.
However, capacity (the amount of cargo a ship can carry), which was 30.8 million TEU last year, is expected to rise 6.6% to 32.8 million TEU this year and expand to 38.9 million TEU by 2028. While throughput is projected to grow 12.9% by 2028, capacity will increase by as much as 26.3% in growth rate.
In this environment, the Ocean Alliance, which includes France’s CMA CGM, China’s COSCO, and Taiwan’s Evergreen, said it will resume Suez Canal transits from next year, making normalization of the Suez Canal more likely. If sailings through the Suez Canal fully resume, ocean freight rates will likely fall back to pre-Red Sea crisis levels.
Before the Red Sea crisis, in 2023, the SCFI averaged 1,005.79, plunging 70.5% from the prior year’s average SCFI of 3,410.20, when the market benefited from the COVID-19 boom. The 2023 SCFI average is also 35.2% lower than this year’s average. The Korea Maritime Institute (KMI) also projected the SCFI could reach around 1,100 next year.
Despite this negative outlook, carriers are continuing to place newbuild orders and buy secondhand ships to increase capacity. They are expanding blank sailings and revamping routes to cut expense and respond to the downturn while bulking up to prepare for a future boom.
According to Linerlytica, a shipping market analysis firm, total container ship orders placed in 2025 reached 5.08 million TEU, up 6.5% from the previous year, hitting a record high.
HMM’s container ship capacity in the third quarter this year was 970,000 TEU, up 8.6% from the same period last year. Next year, three 9,000-TEU methanol-fueled container ships are scheduled for delivery, and in October it also placed additional orders for twelve 13,000-TEU container ships.
Sinokor Merchant Marine, with total container capacity of about 140,000 TEU, also placed its first orders this year for four 13,000-TEU container ships. SM Line, which has capacity of 70,000 TEU, is steadily scaling up, focusing on midsize ships.
Carriers are moving this way because they do not expect rates to fall to the 2015-2016 levels that were below break-even. The SCFI, which was 1,367.45 in 2010, fell to 652.59 in 2016. As a result, carriers including Hanjin Shipping could not withstand the management crisis and went bankrupt.
At the time, ocean freight rates fell because global carriers, including Denmark’s Maersk, ran services such as “seven days a week operations” to push rates down and drive latecomer carriers out of the market.
Now, however, carriers are maintaining sound finances based on profits accumulated during the COVID-19 boom. The industry expects it will be difficult for large carriers to deliberately push rates down for competition.
In the case of HMM, a leading national container carrier, its debt ratio was 362% and current ratio was 159% in 2016, but as of the third quarter this year, the debt ratio is only 25% and the current ratio reaches 601%.
SM Line’s debt ratio and current ratio were 150% and 159% in 2016, respectively, but stood at 14% and 360% last year. Over the same period, Sinokor Merchant Marine improved its debt ratio and current ratio from 203% and 56% to 38% and 368%.
A shipping industry official said, “Although the outlook for rate declines due to oversupply is dominant, unlike past crises, carriers’ financial health is solid, so large carriers have little incentive to drive rates down through cutthroat competition,” adding, “If environmental regulations lead to more scrapping of older ships, the oversupply issue could be alleviated to some extent.”
Source: ChosunBiz
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