When Geopolitics Erases Capacity

For much of this year, container shipping was preparing for the opposite problem: too much capacity.

New vessels were entering the market, freight rates were under pressure, and there was cautious optimism the industry might finally return to something resembling normal after years of disruption.

Then, almost overnight, the conversation changed.

At this week’s TPM Conference in Long Beach, the industry was reminded that geopolitics can erase capacity far faster than it is ever added. As tensions involving the United States, Israel and Iran escalated, what looked like a market defined by oversupply suddenly began to feel far more fragile.

Peter Tirschwell from S&P Global described a market that may be structurally oversupplied, but is now increasingly shaped by sudden and unpredictable disruption, with capacity being removed in real time.

That is already happening. Around the Persian Gulf, vessels are caught in a rapidly changing environment where insurers are withdrawing cover, carriers are suspending bookings and ships are rerouting. Fuel costs are rising, schedules are stretching and equipment is quickly falling out of balance.

Jeremy Nixon from Ocean Network Express confirmed that some ships have already turned back mid-voyage and discharged cargo at alternate ports, echoing the improvised logistics seen in the early days of the pandemic.

At the same time, hopes that container lines might return to the Red Sea and Suez Canal this year have largely faded. With continued security concerns, most carriers remain committed to the far longer route around the Cape of Good Hope, a detour that quietly absorbs millions of TEU of global capacity.

Concerns around the Strait of Hormuz are also growing, with parts of the Arabian Gulf becoming difficult to insure, leaving carriers with limited options beyond omitting ports or discharging cargo elsewhere.

Air freight is feeling the pressure too. Flight suspensions and rerouting across the Middle East have already removed a meaningful slice of air cargo capacity, pushing costs higher and tightening supply.

Even when conflict remains geographically contained, supply chains rarely do. Equipment shortages, delays and congestion ripple across the global network.

For those moving goods around the world, the challenge once again is adapting in real time.