What’s next after a strong peak season
After a strong peak season, there are more uncertainties going forward – weather is playing an increasing role in competition with the geopolitical forces.
But there is also some good news in relation to the Red Sea crisis.
The latest data from Container Trade Statistics shows global TEU demand growth of 5.5% in June compared to June last year. If we exclude the North America and MEISC regions to eliminate the effects of the US Trade War as well as the Hormuz crisis, demand growth in the rest of the world was a very strong 9.6%.
Perhaps even more importantly, growth tended to be concentrated on the longer trade routes, which means that demand measured in TEU*Miles grew as much as 7.1% in June.
This strong demand development globally is what led to a very strong peak as well over summer. Spot rates were pushed to levels at, or in some cases above, what we saw in 2025.
In the early parts of 2026, the outlook was for a peak season in 2026 which would be strong, but not as strong as in 2025. What made it even stronger was the combination of demand growth being significantly higher than expected at the time, as well as the impact of the Hormuz crisis.
The Hormuz crisis added to port congestion problems and some longer routings for parts of the cargo. These both have the effect of reducing capacity.
Overcapacity on the Horizon
There has been much talk about coming overcapacity, and that is essentially unchanged. What needs to be remembered here is that the talk about overcapacity was focused on 2027 and beyond. There was never any talk about overcapacity in 2026, as the outlook was merely for some 4-5% capacity growth this year.
The orderbook is now at 38.7% of the total fleet, to be delivered over the next 3-3½ years. Even with aggressive scrapping, it is difficult to see this happen without incurring overcapacity.
Unless of course new problems arise to absorb the overcapacity.
The Red Sea crisis is what prevented overcapacity from becoming a problem already in 2024.
But for the Red Sea crisis, there are now signs of a gradual resolution. CMA CGM has already operated vessels on some services via the Suez. Presently they use the route for some of their vessels (not all) on their EPIC, FAL 1, FAL 3, OCR, MEDEX, MEX and BEX2 services. Maersk and Hapag-Lloyd are in the process of shifting their Gemini services AE15/SE3 and AE19/SE4, and Maersk has also shifted their MECL service. COSCO/OOCL has announced a Far East to Red Sea service.
These are all indications of a slow and gradual reversal to normality. Should this continue, we will see a release of capacity onto the market, in addition to the orderbook, as sailing distances contract once again. This is the opposite of the absorption effect needed to curtail the coming overcapacity.
The Hormuz crisis appears unlikely to be resolved anytime soon; hence the current status quo is likely to persist. A worst-case scenario would be an expansion of the crisis to the Suez Canal. We have seen a tanker attacked by a drone in the port of Damietta in recent weeks, although no blame has been assigned for this attack. It is, however, a “warning shot” that a Suez impact is a possibility. If so, that would indeed lead to capacity absorption for liner companies.
El Niño Could Challenge the Panama Canal
A much more predictable problem relates to the Panama Canal.
The El Niño weather phenomenon has appeared again. Whenever there is El Niño, there is a likelihood of lower rainfall in Panama, and hence lower water levels in Lake Gatun in the middle of the country. It is water from Lake Gatun which is used for the locks in the Panama Canal. If the water level drops, it leads to capacity restrictions through the canal. Last time we saw this was 2023-24.
Looking at El Niño data combined with the water level in Lake Gatun over the past many decades, one finds that every time El Niño falls into the category of “Strong” or “Very Strong”, it leads to very low water levels in the lake.
The new update for El Niño, from mid-August 2026, sees a 100% likelihood of a “Strong” or “Very Strong” El Niño from September to December. It also sees a 67% likelihood of the strongest El Niño on record since measurements began in 1950.
The Panama Canal authorities have already begun limiting the draft of vessels going through to conserve water. But with this outlook, anyone who relies on moving cargo via the Panama Canal should begin to draw up contingency plans. Part of the plan should be an expectation of steep increases in carrier surcharges for passage. Part of the plan should be considerations of alternative routing options. Should the forecasts prove correct, it is unlikely all the usual cargo can be moved via the canal.