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The Merchant · n°174 · January 8, 2026

Capacity surge carries sting in its tail

Figure of the week

$10 billion The container shipping industry is on course to see a $10 billion loss in 2026, according to Drewry forecasts. Lackluster Trans-Pacific demand is expected to account for a good part of the shift into the red.

Quote of the week

“There is a distinct difference in the services offered into the US East Coast and US West Coast, and the way carriers are managing capacity. This is motivated by underlying stronger demand into the East Coast with the West Coast more sensitive to US China geopolitical tensions.” Xeneta chief analyst Peter sand explains why carriers are adopting a more aggressive blanking strategy on capacity on Far East to US East Coast port-bound services than their West Coast counterparts.

Capacity surge carries sting in its tail

2026 has opened with a surge in capacity on the Asia–North America West Coast trade. On the face of it, that would appear to be good news for shippers already benefiting from weak rates. However, analysis from Sea-Intelligence said significantly higher volumes out of China could lead to port bottlenecks. Comparing 2026 capacity deployment against a 2015–2019 historical baseline, the consultancy identified a capacity spike due to take place in week two. This indicates that the 2015–2019 flat capacity deployment has been replaced by a late-season spike that carries a much higher risk of port congestion in the final two weeks before the Chinese New Year holiday. Capacity is expected to be withdrawn in the final week before the Chinese New Year, which in turn raises the risk of cargo rollovers and potential delays to shipments. East Coast capacity is also expected to remain higher than normal in the run-up to CNY. “The late-cycle timing of the trans-Pacific capacity changes carries a significantly higher risk of pre-holiday bottlenecks and cargo rolls, as massive volume is injected into Asia–North America West Coast with almost no operational runway remaining,” the consultancy said. However, in Asia–North Europe, capacity is likely to see even greater surges. Carriers are doing their best to implement blank sailings and GRIs to stabilize pricing, leading to a slight increase in rates. Overall, though, it looks as though US retailers are continuing to keep inventories lean in 2026. With global container ship capacity due to increase by 4% throughout 2026, shippers should be able to look forward to further falls in rates throughout the year - all things being equal. The question remains, however, how ocean carriers will respond to rates bottoming out at levels that could push them into the red, as is already beginning to happen. So far, carriers have shown themselves much more willing to blank services to East Coast ports (see quote). Shippers should count their rate blessings while they last and before carriers start to take more drastic steps.

More turbulence ahead for air freight shippers

E-commerce volumes between China and the US may have started to slide in 2025, but residual volumes and growing demand for AI components are likely to continue to put pressure on air cargo capacity in 202 6. Plans to build huge AI data centers will lead to strong demand for semiconductors and other high-tech products. Meanwhile continued consumer demand for rapid delivery means remaining Asian e-commerce volumes will continue to add to capacity pressures. In 2025, the fall in e-commerce volumes between China and the US following the scrapping of the de minimis exemption was largely offset by increased volumes from Southeast Asia to the US. Additional volume increases from Asia to Latin America and Europe also indirectly affected US shippers, as airlines began to divert capacity to those other trades. This means shippers can expect more volatility in 2026, with volumes from Taiwan, the world’s largest semiconductor supplier, and Vietnam likely to be especially strong. However, 2026 is also expected to see increased air freight capacity, with new freighters entering service and belly space in passenger aircraft increasing. For the next week, both capacity and rates are likely to remain largely stable.

Furniture importers gain a year’s tariff grace

US tariff announcements came thick and fast in 2025 and 2026 is shaping up to be no different. However, shippers are likely to welcome the latest White House tariff statement. The Trump administration has delayed tariff hikes on imported furniture, kitchen cabinets and bathroom vanities for a year , citing “productive negotiations” with trade partners. Tariffs on certain imported wooden furniture, kitchen cabinets and vanities will remain at 25%, rather than rising to between 30% and 50%. Imports from China and Vietnam were expected to be particularly affected by the increases. Concerns over the rising costs of everyday products became a key electoral issue in recent state and local US elections, with Republicans losing a number of key seats to Democrats who were blaming tariffs for price rises. The National Association of Home Builders has once again urged the Trump administration to exempt building materials from its tariff strategy, saying the tariffs “raise construction costs, impede supply chains and place upward pressure on home prices.” Shippers are also paying close attention to the US Supreme Court, which is due to give its verdict on the legality of many of the Trump administration’s key tariff policies in early 2026. Early indications suggest the court may overturn many of the White House’s recent tariff hikes, a move that would be warmly welcomed by many shippers. It is uncertain exactly when any verdict will be reached.

🤔 Did you know ?

Cosco shipping has awarded the first tranche of its $7 billion fleet expansion and modernization program, a $ 490 million deal for 13 ships. The Chinese carrier awarded the contract for nine feeder container ships and four multi purpose and heavy lift ships, to China Shipbuilding Group.

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👋 See you next week, The Merchant team

Sources

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