Overcapacity could become a dominant force shaping ocean freight services over the next few years, as ship orders continue to surge.

While demand for ultra-large vessels exceeding 20,000 TEU has eased, orders for mid-sized and feeder ships remain strong. The current order book stands at around 10 million TEU – the highest level in 15 years.

Over the past two to three years, carriers have invested billions of dollars into expanding their fleets, driving capacity growth at an unprecedented rate.

Yet demand on the world’s largest trade lane, Asia–North America, has fallen off since the introduction of U.S. tariffs during the Trump administration. Even with new trade agreements in place, duties remain well above pre-tariff levels, curbing demand and contributing to oversupply.

Asia–Europe has seen some growth this year, but excess capacity may have been what has muted the current peak season.

Extraordinary global events have temporarily offset oversupply pressures in recent years. Disruptions such as the COVID-19 pandemic, the Suez Canal blockage, and more recently, Houthi attacks in the Red Sea have all triggered sudden periods when demand exceeded capacity, driving freight rates sharply higher.

If conditions improve in the Middle East and carriers become able to resume normal Red Sea transits, overcapacity could escalate rapidly. An estimated 25–30% of the ships currently needed to operate detours around the Cape of Good Hope would no longer be required.

The future remains difficult to forecast, but we would not be surprised to see overcapacity have a defining influence on ocean freight markets in the next year or two.

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