Shipping companies are expanding blank sailings (Blank Sailing·temporarily suspending vessel operations) and reorganizing routes to cope with weak market conditions caused by structurally low freight rates and the risk from the resumption of Suez Canal transits. At the same time, they are steadily increasing capacity in preparation for the coming boom cycle.
If Suez Canal transits resume, a drop in ton-miles (Ton-mile·the value obtained by multiplying cargo weight by distance traveled) could push down freight rates. However, the shipping industry does not expect a crisis like the 2015 rate slump and is trying to scale up to boost competitiveness.
According to Drewry, a shipping market analysis firm, as of the 27th there were a total of 75 blank sailings (Blank Sailing) that carriers worldwide had decided on or announced on major routes this month. 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 more blank sailings, the industry is also reorganizing routes. The Premier Alliance, a shipping alliance that includes HMM, said on the 15th that it would revamp the Asia–Northern Europe trade by reducing FE3's 11 port calls to 8 and FE4's 13 port calls to 5. The Gemini Alliance and the Ocean Alliance, other shipping alliances, have also decided to cut some routes.
Carriers are doing this to cut expense and raise efficiency while sea freight stays rangebound at low levels. The Shanghai Containerized Freight Index (SCFI), a key route rate index based in Shanghai, stood at 1,656.32 as of the 26th. That was up 6.7% from the previous week, extending gains, but 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 rose for a time after the Red Sea crisis erupted 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 deliveries of newbuilds ordered during the COVID-19 boom are swelling supply relative to demand. Container ship throughput, which was 246 million TEUs (1 TEU = one 20-foot container) last year, is expected to rise 3.5% to 255 million TEUs this year and increase to 278 million TEUs by 2028.
However, capacity (the amount a ship can carry), which was 30.8 million TEUs last year, is expected to rise 6.6% to 32.8 million TEUs this year and increase to 38.9 million TEUs by 2028. While throughput is projected to increase 12.9% by 2028, capacity's growth rate will reach 26.3%.
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 sailing through the Suez Canal ramps up, sea freight rates could 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 SCFI average (3,410.20) that 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 be around 1,100 next year.
Despite this outlook for a sluggish market, carriers are increasing capacity by continuing to order newbuilds (新造·newly built) or purchase secondhand ships. They are expanding blank sailings and revamping routes to cut expense and respond to the crisis, while bulking up to prepare for a future boom.
According to Linerlytica, a shipping market analysis firm, container ships ordered in 2025 totaled 5.08 million TEUs, up 6.5% from the previous year and a record high.
HMM's container ship capacity in the third quarter this year was 970,000 TEUs, 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 the company also placed additional orders for twelve 13,000-TEU container ships.
Sinokor Merchant Marine, whose total container capacity is around 140,000 TEUs, also ordered four 13,000-TEU container ships for the first time this year. SM Line, which has capacity of 70,000 TEUs, is steadily scaling up, focusing on midsize ships.
These moves by carriers reflect expectations that sea freight rates will not fall to the 2015–2016 levels that dipped 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, the decline in sea freight rates occurred because global carriers, including Denmark's Maersk (Mearsk), ran services such as "seven-days-a-week operations" to force later entrants out of the market, dragging down rates.
Now, however, carriers are maintaining healthy finances based on profits accumulated during the COVID-19 boom. For that reason, the industry expects it will be difficult for large carriers to deliberately cut rates to compete.
In fact, HMM, a leading national container carrier, had a debt ratio of 362% and a current ratio of 159% in 2016, but as of the third quarter this year its debt ratio is just 25% and its current ratio is 601%.
SM Line's debt ratio and current ratio were 150% and 159%, respectively, in 2016, 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, "The dominant view is that rates will fall due to oversupply, but unlike past crises, carriers are in sound financial condition, so large carriers have little incentive to drive down rates through cutthroat competition," adding, "If more aging ships are scrapped due to environmental regulations, the oversupply issue could be alleviated to some extent."