Companies expand blank sailings, restructure routes amid low freight rates while preparing for future boom cycle
The shipping industry is expanding blank sailing (temporarily suspending vessel operations) and restructuring routes to address sluggish business conditions caused by structurally low freight rates and the resumption of Suez Canal transit. At the same time, it is steadily increasing cargo capacity in preparation for an upcoming boom cycle.
If Suez Canal transit resumes, ton-mile (a value calculated by multiplying cargo weight and distance traveled) is expected to decrease, which could lead to a drop in freight rates. However, the industry believes this will not lead to a crisis like the 2015 freight rate decline and is instead focusing on expanding scale to enhance competitiveness.
According to Drewry, a maritime market analysis institution, as of this month, global shipping companies have decided or announced 75 blank sailings on major routes. This marks a more than 50% increase compared to the same period last year. The institution also reported that 35 blank sailings have been decided for January next year.
Alongside increased blank sailings, shipping companies are restructuring routes. The Premier Alliance, a shipping alliance to which HMM belongs, announced on the 15th that it would reduce the number of port calls on the Asia-North Europe route from 11 to 8 for the FE3 route and from 13 to 5 for the FE4 route. Other alliances, the Gemini Alliance and Ocean Alliance, have also decided to reduce some routes.
These moves aim to reduce costs and improve efficiency as maritime freight rates remain low. The Shanghai Containerized Freight Index (SCFI), a key freight rate index based on Shanghai, recorded 1,656.32 as of the 26th. While it rose by 6.7% from the previous week, it remains 32.7% lower than the same period last year.
The SCFI had surged to over 5,000 during the COVID-19 period when cargo demand spiked but has been declining since then. It temporarily rose after the Red Sea crisis late last year but turned downward again, averaging 1,581.34 this year — 36.9% lower than the same period last year.
This decline is driven by increased supply as new ships ordered during the COVID-19 boom are being delivered. Container cargo volume, which recorded 246 million TEU (1 TEU = 1 twenty-foot container) last year, is expected to grow by 3.5% to 255 million TEU this year and reach 278 million TEU by 2028.
However, cargo capacity, which was 30.8 million TEU last year, is projected to increase by 6.6% to 32.8 million TEU this year and expand to 38.9 million TEU by 2028. While cargo volume is expected to grow by 12.9% by 2028, cargo capacity is set to surge by 26.3%.
In this context, the Ocean Alliance, which includes France’s CMA-CGM, China’s COSCO, and Taiwan’s Evergreen, announced plans to resume Suez Canal transit next year, signaling the canal’s normalization. If Suez Canal operations fully resume, freight rates could drop to pre-Red Sea crisis levels.
Before the Red Sea crisis in 2023, the SCFI averaged 1,005.79, a 70.5% plunge from the previous year’s average of 3,410.20 during the COVID-19 boom. The 2023 average was also 35.2% lower than this year’s average. The Korea Maritime Institute (KMI) projected that the SCFI could reach 1,100 next year.
Despite these challenges, shipping companies continue to increase cargo capacity through new ship orders and secondhand purchases. While reducing costs via blank sailings and route restructuring to cope with the downturn, they are also preparing for future booms by expanding their scale.
According to Linerlytica, a maritime market analysis firm, container ship orders in 2025 reached 5.08 million TEU, a 6.5% increase from the previous year, setting a record high.
HMM’s container ship capacity in the third quarter of this year was 970,000 TEU, an 8.6% increase from the same period last year. While three 9,000 TEU methanol-powered vessels are scheduled for delivery next year, the company also ordered 12 13,000 TEU-class vessels in October.
Sinokor Merchant Marine, with a total container capacity of 140,000 TEU, has also ordered four 13,000 TEU-class vessels for the first time this year. SM Line, with 70,000 TEU capacity, is steadily expanding through mid-sized vessels.
These moves reflect the industry’s belief that freight rates will not fall as low as the 2015-2016 crisis levels. The SCFI, which stood at 1,367.45 in 2010, dropped to 652.59 in 2016, leading to the bankruptcy of Hanjin Shipping and other carriers.
At the time, global carriers like Denmark’s Mearsk intentionally lowered rates through services such as seven-day-a-week operations to drive out competitors.
However, today’s shipping companies maintain healthy financial structures backed by profits from the COVID-19 boom. This makes it difficult for large carriers to engage in price wars.
For instance, HMM’s debt ratio was 362% and current ratio 159% in 2016, but as of the third quarter of this year, its debt ratio is 25% and current ratio 601%.
SM Line’s debt ratio and current ratio improved from 150% and 159% in 2016 to 14% and 360% last year. Sinokor Merchant Marine’s figures also improved from 203% and 56% to 38% and 368% over the same period.
A shipping industry source said, “While oversupply is expected to drive freight rates down, unlike past crises, carriers’ financial health is strong, reducing incentives for large companies to engage in destructive competition. Environmental regulations may also ease oversupply by accelerating the retirement of older vessels.”
