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CMA CGM¡¯s Strategic Return to the Red Sea

June 24, 2025 ¨C French shipping giant CMA CGM has made a landmark return to the Suez Canal with its 20,000 TEU "Osiris", the first ultra-large container vessel to transit since Houthi attacks forced diversions around Africa¡¯s Cape of Good Hope in late 2023. The move comes with a 15% toll discount from the Suez Canal Authority (SCA) for ships over 130,000 net tons, valid until August 2025.

Why This Matters for Asia-Europe Trade

1?? Faster Transit Times:

• 10¨C14 days saved vs. Cape detours (e.g., Shanghai-Rotterdam drops from 42 to 28 days).

• CMA CGM¡¯s "Levant Red Sea Express" new service (Istanbul-Jeddah) further optimizes regional connectivity.

2?? Cost Relief:

• 55% surge in Middle East rates (e.g., Shanghai-Dubai at $2,761/FEU) may ease if more carriers follow.

• SCA¡¯s discount cuts $200,000+ per transit for mega-ships, incentivizing Red Sea returns.

3?? Risk vs. Reward:

• Houthi threats persist, but CMA CGM¡¯s phased re-entry (with 3 ships in June) tests security.

• War risk insurance remains 3× higher than pre-crisis levels.

Potential Impacts on Shipping Dynamics

1. Rate Stabilization

• Current Asia-Europe rates: ~$7,000/FEU (vs. $2,400 pre-crisis).

• If Suez traffic recovers: Analysts project 20¨C30% rate drops by Q3 2025.

2. Capacity Rebalancing

• 12% global capacity currently tied to Cape routes could shift back, easing vessel shortages.

• Singapore congestion (450,000 TEU backlog) may alleviate as fewer ships divert.

3. Competitive Shifts

• Maersk/Hapag-Lloyd still avoid Red Sea; CMA CGM¡¯s gamble could win market share.

• Niche carriers (e.g., Ellerman) face pressure as mainstream options return.

Key Takeaways for Shippers

? Monitor Suez Reopenings: More carriers may follow if Osiris transits safely.
? Lock Long-Term Contracts: Rate volatility likely as Cape/Suez options coexist.
? Diversify Routes: Rail/airfreight remain backups amid lingering risks.

"This isn¡¯t just about toll savings¡ªit¡¯s a litmus test for Red Sea viability," says Xeneta¡¯s Peter Sand.