The Merchant · n°211 · October 22, 2026

The Merchant - 2027 capacity glut ahead, AI lifts air freight rates

Figure of the week

1 million

The Port of Los Angeles handled 1,042,652 twenty-foot equivalent units in September - its busiest ever month. Volumes exceeded the previous monthly record, set in July 2025, by more than 20,000 TEUs. Q3 of 2026 also represented its busiest ever quarter as it handled 3 million TEUs from July through September.

Quote of the week

“I was one of the analysts predicting that 2024 was going to see a significant cyclical downturn. Did that happen? Absolutely not. (But) in the absence of a new geopolitical disaster, after Chinese New Year is basically when we will begin to see this cyclical downturn.”

Rolf Habben Jansen draws attention to the continuing likelihood that new vessel orders will lead to overcapacity in container shipping markets.

2027 - the year of the capacity glut?

For some time now, industry insiders have been predicting surging container capacity and a lasting drop in spot rates on major trade lanes. It looks like 2027 may finally be the year when it comes to pass. Analysts at a panel discussion hosted by Hapag-Lloyd widely agreed that container shipping is on track for a cyclical downturn. That, however, is where the consensus ends. The timing and severity of the downturn remain heavily debated. And predictions that a glut of capacity on the market will give shippers the upper hand remain dependent on one important proviso: that no new major geopolitical shifts or disasters stand in the way. On the one hand, industry insiders largely agree that the huge orderbook for new vessels will sooner or later lead to widespread excess capacity. The fact that carriers are proving remarkably disposed to return to Red Sea routings despite the current conflict between the Houthis and Saudi Arabia underlines the trend. Yet Hapag-Lloyd CEO Rolf Habben Jansen played down the potential impact of the glut of new orders. “I think that the effect in 2027 will not be all that big,” he said. “When I look at 2027, the deliveries in the beginning of the year are not all that significant. Quite a bit of it comes in the second half, and especially in 2028 and 2029. We’ll certainly need to see whether the industry can absorb that.” Nevertheless, he added, “Common wisdom would tell us that 2028 and 2029 could certainly see some overcapacity. Probably not everywhere all the time, but certainly some.” In turn, carriers are likely to respond by scrapping older vessels, slowing vessels, withdrawing capacity or blanking sailings. Much, of course, will depend on underlying demand. Sea-Intelligence, for its part, has forecast that cyclical overcapacity will peak in 2027. The consultancy also estimates that this will be at a level comparable with the container shipping price wars of 2016. What the market will not experience, on the other hand, is an imbalance as pronounced as that which occurred during the 2009 financial crisis. Shippers, then, may find themselves enjoying a protracted period of lower rates without it turning into a bonanza.

US air freight shippers have been warned to prepare for sharply rising rates following the Golden Week holiday, as AI infrastructure demand pushes up volumes. Anecdotal evidence suggests that some AI hyperscalers have yet to book peak season space. If true, this would mean new bookings will add significant pressure to an already firm market. And this latest push comes despite the TAC Baltic Air Freight Index showing a 2.1% fall in global rates during Golden Week. Analysis of Census Bureau trade data for August by supply chain professor Jason Miller shows air freight imports reached a record by weight. August air freight imports were up 20% year on year and were 42% above the 2023 average. Exceptionally high Taiwanese volumes have been one of the key features of growing AI infrastructure demand. At the same time, fuel costs are rising faster than freight rates, putting pressure on carriers’ margins. Shippers are also seeing rising fuel surcharges. Cathay Cargo’s Hong Kong-origin long-haul fuel surcharge was up almost 26% for the first half of October. Japan Airlines has said it will raise its fuel surcharge on domestic exports bound for the US by 3.8% on October 16. Shippers should anticipate higher rates, tight capacity and possible rising fuel surcharges throughout the peak season.

Golden Week gives Chinese ports vital breathing room

Key Chinese ports appear to have lived up to hopes that the Golden Week holiday would give them breathing space to reduce congestion. Successive typhoons between July and September had caused lengthy port closures, with some vessels forced to wait up to two weeks. The main affected ports were Shanghai, Ningbo, and Kaohsiung. However, the Golden Week holiday, which effectively ended on October 7, saw reduced cargo volumes and blank sailings. The hope was that this would allow ports to catch up on congestion. And while some delays still exist at specific terminal hotspots carriers are now reporting significantly shorter wait times. Overall, Shanghai and Ningbo have seen the biggest improvement, with waiting times falling to a little over two days this week. And according to Portcast data, vessel queues are continuing to improve at Shanghai and Ningbo, though dredging works are slowing the improvement. On October 12, 30 vessels were waiting at Shanghai, while 35 were queuing at Ningbo. During the peak of storm-related disruption, 125 vessels were waiting at the former and 83 at the latter. The upshot for shippers is likely to be reduced waiting times and delays as the effects of the improvements filter through the supply chain. It may also lead to downward pressure on rates as more capacity is released into the market.

❓ Got a question about your flows? We answer it in an upcoming edition.

Did you know?

HMM is to go on a $1.6 billion spending spree to acquire new vessels. The South Korean carrier will buy 12 long-haul and regional container ships. This marks its first purchase of new vessels since its $20 billion fleet acquisition and terminal expansion plan was released in July.

Sources

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