The container market is moving towards a new phase of overcapacity. This is stated by Sea Intelligence in its latest report, highlighting how the supply of hold capacity will likely peak in 2027, at a level not seen since 2016, the year the last price war between shipping companies broke out.
The consultancy firm conducted an in-depth analysis, comparing the levels of hold capacity supply with the forecasts for container demand growth, and taking into account in its analysis key factors such as the impact of port congestion problems, the capacity absorption due to the Red Sea crisis, and the trends in the demolition market.
Sea Int. predicts that the Red Sea crisis will be resolved by mid-2026, the year from which ships will likely return to transit via Suez rather than the Cape of Good Hope. The shortening of sailing distances along the east-west routes will likely have the effect of freeing up a huge amount of capacity, currently absorbed by the longer transits along the African route.
The projection, however, is subject to significant uncertainties and depends on the forecast of an increase in ship demolition activities starting from 2026, with the elimination of 13% of vessel units over 20 years old.
The timing of a resolution to the Red Sea crisis also remains a critical variable; a prolonged crisis would continue to absorb capacity and mitigate part of the oversupply. Conversely, the current US trade war presents a clear downside risk for demand, while the issuance of further new ship orders could further exacerbate future overcapacity.
