Suez Canal expected to reopen soon despite Middle East tensions

Container shipping through the Suez Canal (Source: BizNews)

Most shipping industry stakeholders expect transit through the Suez Canal to resume before the end of 2025, amid forecasts of increased tariffs imposed by Donald Trump, according to a Drewry survey.

Osama Rabie, chairman of the Suez Canal Authority, has expressed strong interest in shipping lines returning, according to a report from the maritime research consultancy. He said traffic could start to pick up again by the end of March, with a full recovery expected by mid-year, provided the Gaza ceasefire holds.

A significant proportion of respondents (54%) agreed with him, believing that normal operations at the canal will return before the end of the year. The second largest group (29%) predicted the situation would only be resolved by 2026, while a small minority (2%) did not see a recovery before 2030.

This plays a key role in forecasting the evolution of the container shipping market. The reopening of the Suez Canal is expected to have a rapid impact on the supply-demand balance, according to Simon Heaney, senior director of container research at Drewry, in the latest update published by STAT Media Group.

“We estimate that diversions via the Red Sea have reduced effective container shipping capacity by approximately 9%. Once this stranded capacity re-enters the market, carriers could see freight rates decline unless they successfully manage supply through other means.” 

The report further highlights the close connection between the trade outlook and geopolitical events.

“The ceasefire agreement between Israel and Hamas is precarious, and Donald Trump's involvement further complicates projections.”

Against this volatile backdrop, it is unwise for shipping companies to risk sending crews into dangerous areas threatened by Houthi rebels, the report said.

The survey gathered responses from more than 300 respondents, of whom the majority (34%) were shippers, followed by 13.7% from forwarders and 10% from ports and terminal operators.

Trump and Tariffs: Global Markets Remain Uncertain

As for Trump, he is clearly sticking to his guns on tariffs. However, his previous reversals on Canada and Mexico following stock market volatility suggest he may be under economic pressure. Global markets remain uncertain as the threat of higher tariffs continues to mount.

The survey found that a majority of respondents expect new tariffs to be imposed, although the severity varies. When asked about the US effective tariff rate (total tariffs collected divided by total customs value) at the end of the year, the most common estimate (32%) was between 5% and 10%. As of September 2024, this figure is only 2.4%.

A significant proportion of respondents expect tariffs to be even higher, with 13% expecting them to exceed 20% — a level not seen since the Great Depression, according to the report.

As for trading partners that could be affected, China (85%) tops the list, followed by Mexico (76%), Canada (73%) and the European Union (60%). However, countries that might be expected to be spared Trump’s tariffs, such as India (16%) and Vietnam (14%), are also considered at risk.

“The multitude of external factors affecting container shipping make short-term forecasting highly uncertain. Rather than speculating, it seems more prudent to wait for events to unfold and reassess accordingly.”

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Source: Phaata.com (According to Freightwaves) 

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