The prospect of the Red Sea shipping route reopening exacerbates the pressure of declining profits! The global shipping industry may face a "second winter".

With the potential for the reopening of the Red Sea shipping channel increasing, global container shipping companies are preparing for a decline in profits by 2026. The reopening of the Red Sea route will exert pressure on freight rates, exacerbate the problem of excess capacity, and further amplify the pain brought by the trade environment. Container shipping companies such as Maersk from Denmark, Hapag-Lloyd from Germany, and Nippon Yusen Kaisha from Japan are all expected to turn in weaker performances in 2026 after a difficult 2025 due to tariff turmoil. Analysts from Bank of America state that the reopening of the Red Sea route will exacerbate the existing "structural problem of excess capacity". According to Bloomberg Intelligence analyst Kenneth Loh, capacity is still expanding at a record pace, with new ship capacity expected to surge by 36% from 2023 to 2027. Conversely, assuming that container shipping companies fully return to the Red Sea route, container shipping demand is expected to shrink by 1.1% in 2026. According to the Drewry World Container Index, as of the week ending January 29, the price of a 40-foot container dropped by 4.7% to $2,107. Although not guaranteed, as Maersk successfully completed two Red Sea voyages since the Houthi attacks on ships began in Yemen in 2023, the reopening of Red Sea shipping is becoming more likely. HSBC analyst Parash Jain previously predicted that if the interruption in the Red Sea lasts until at least mid-2026, freight rates will decline by 9% to 16% this year. However, now with Maersk's return to the Red Sea implying a quicker-than-expected recovery in shipping order, HSBC says rates may further decrease by 10%, causing Maersk and Hapag-Lloyd to incur losses. Parash Jain points out that a rapid recovery of Red Sea shipping may initially lead to congestion in European ports, providing support for freight rates. Analysts from Citigroup, led by Kaseedit Choonnawat, also suggest that if Western economies seek to restock in the first half of 2026, the reopening of the Red Sea route may also provide some support to freight rates. However, rates are expected to stabilize at lower levels later on. Bank of America predicts that Maersk will issue a "soft" profit guidance for 2026 and reduce its share buyback program by 50%. Market consensus shows that this Danish shipping giant will incur its first annual loss since 2017 this year. Arya Anshuman and Simon Heaney from Drewry Shipping Consultants state that major shipping companies are still cautious and unwilling to make significant adjustments to their route networks, as sudden changes in Houthi activities could overnight force a complete reversal of shipping strategies. They say, "Shippers are also unwilling to put high-value goods at risk and have already become accustomed to longer shipping times. Meanwhile, ports may struggle to cope with a sudden influx of vessels." Although Maersk has recently started related voyages, France's CMA CGM, after allowing three routes to return to the waterway, has withdrawn its decision to use the Red Sea route. Kenneth Loh says, "This highlights the high volatility and unpredictability of the situation in the region." Asian counterparts also face similar challenges. Kenneth Loh points out that the biggest "variable" in the Asian shipping market this year will be whether the Red Sea route fully reopens, its importance even surpassing tariff considerations. Analyst Carlos Furuya from Jefferies wrote in a report that for Japanese shipping companies like Nippon Yusen Kaisha, profit pressures in the container shipping business mainly come from excess capacity and tariff uncertainties. Ocean Network Express (ONE), a privately owned container shipping company jointly owned by Nippon Yusen Kaisha, Mitsui O.S.K. Lines, and Kawasaki Kisen Kaisha, announced a net loss of $88 million in the third quarter due to an increase in new vessels and slow flow of goods on the Asia-North America and Europe routes. The company expects vessels to continue circumnavigating the Cape of Good Hope, with freight rates gradually rebounding in the fourth quarter. According to Arya Anshuman and Simon Heaney from Drewry, Asian shipping companies may have advantages in terms of profit margins compared to their European counterparts, as they benefit from stronger regional demand and more resilient spot prices compared to the global average. They say, "Trade within the Asian region benefits from higher operational stability, as it is less exposed to factors such as tariffs and geopolitical disturbances like those affecting major global trade routes across the Pacific and Eurasia."