Is Shipping About to Return to the Red Sea? What It Means for Freight Rates

Is it over?

We may have finally reached the end of the crisis in the Red Sea. Iran-backed Houthi rebels have been attacking ships in the Red Sea and Gulf of Aden for over a year. It’s caused ocean freight carriers to avoid transiting the area with container ships. That has meant sailing down and around Africa instead of utilizing the Suez Canal to connect major shipping routes. Thus, more ships have been needed to move the same amount goods around the world. That increase of capacity use meant steep increases on freight rates.

Houthis to Stop Attacks on Non-Israel Shipping

In the wake of the ceasefire between Israel and Hamas, the Houthis have said they will stop attacking ships in the Red Sea area. At least non-Israel ones. Charlie Bartlett reports in the Loadstar:

Houthi communiques have confirmed that the group will cease attacks on most vessels in the Red Sea, continuing to target ships owned by Israeli companies or flying the Israeli flag.

Of course, the Houthi have attacked ships in the past because of bad or outdated intelligence, believing them to be Israel-linked ships when they were not. That the Houthi are still planning to attack Israel-linked ships transiting the Red Sea or Gulf of Aden is obviously still a problem. And the Houthi added parameters for upping its aggression to additional ships again, according to Bartlett’s article:

… the group added that “in the event of any aggression against the republic of Yemen” by the US, the UK, or Israel, it would resume attacks on US/UK vessels.

Carriers Uncertain About Return to Suez Canal

Does this mean ocean freight carriers will start transiting the Suez Canal again? Well, they’re reportedly a bit skittish about the safety of doing so.

Greg Knowler reports in the Journal of Commerce (JOC):

Ocean carriers say they will only return to Red Sea transits “when it is safe to do so,” despite an announcement Sunday by Yemen’s Houthi militants that they will limit their attacks on shipping to Israel-affiliated vessels.

…

“We will closely analyze the latest developments and their impact on the security situation in the Red Sea. Otherwise, the following applies unchanged: we will return to the Red Sea when it is sufficiently safe to do so,” Hapag-Lloyd spokesman Tim Seifert told the Journal of Commerce Monday.

Maersk released a similar statement Monday with the carrier calling developments in the region “positive.”

So, no. Carriers aren’t returning container ships to the Red Sea and Gulf of Aden quite yet. But they’re obviously monitoring the situation closely. And while they’re all saying similar things about returning ships there when it’s safe to do so, it does appear that could happen soon.

Freight Rates Should Drop Dramatically with Return of Shipping Through Red Sea

When it does happen, international shipping’s return to the Red Sea should be very good news for shippers.

Before the attacks in the Red Sea happened, the international shipping industry was in the middle of a big increase of capacity entering the market. The attacks and rerouting away from the Suez Canal, as above mentioned, greatly curtailed that capacity. It was thought freight rates were about to plummet, but the crisis made them soar instead.

If carriers are able to resume transits through the Gulf of Aden, Red Sea, and Suez Canal, it will be like capacity flooding back into the market.

That increase on the supply side of the supply/demand equation in international shipping should put considerable downward pressure on freight rates. That’s good news for shippers but bad news for carriers.

High freight rates helped carriers have excellent profits in 2024. That may add extra reason for ocean freight carriers to take their time in returning to the Suez Canal. But at this point, it really seems like just a matter of time. Right now, 2025 is shaping up to be a year that swings back to more reasonable freight rates for shippers.