Weekly highlights

Ocean rates – Freightos Baltic Index

Asia-US West Coast prices (FBX01 Weekly) stayed level at $2,321/FEU.

Asia-US East Coast prices (FBX03 Weekly) stayed level at $3,386/FEU.

Asia-N. Europe prices (FBX11 Weekly) fell 3% to $2,261/FEU.

Asia-Mediterranean prices (FBX13 Weekly) fell 2% to $3,027/FEU.

Air rates – Freightos Air index

China – N. America weekly prices fell 5% to $5.28/kg.

China – N. Europe weekly prices fell 6% to $3.49/kg.

N. Europe – N. America weekly prices fell 5% to $1.91/kg.

Analysis

US tariffs on China – introduced and then quickly raised to 145% in early April – are already causing pain to the US logistics market and to shippers whose first goods subject to these tariffs are starting to arrive at US ports.

The tariff hike has driven a sharp drop in China – US container flows with manufacturing in China also being negatively impacted. And even with a 90-day tariff pause for many other US trading partners and the US’s recent easing of terms for auto tariffs, some countries, like Taiwan and Korea where automotive goods make up a significant share of exports to the US, are seeing manufacturing take a hit as well.

Many US importers have paused orders out of China, but shippers (as well as manufacturers) can hold out only so long before consumers will start to see empty shelves or higher prices.

There are reports that some major US retailers have already restarted ordering from China, either out of necessity or anticipation that tariff levels will be lower by the time of arrival as the US and China get closer to direct negotiations. In any case, the reduction in US sourcing from China for the last few weeks will start to be felt soon in fewer May container ship arrivals and lower import volumes.

The pause is also raising concerns over what will happen if US tariffs on China are reduced and volumes quickly rebound. The longer the pause the more disruptive the potential surge – in the form of increased container rates and possible congestion – might be.

In the meantime, the White House continues to express interest in negotiations that would reduce tariffs on a long list of trading partners before the 90-day pause on reciprocal tariffs ends in July, with the European Union being asked, for example, to buy more US goods as part of their deal.

Despite dropping volumes out of China and some increase in demand out of other countries like Vietnam, transpacific container rates were level this week as carriers have successfully reduced capacity to current volume levels through a significant number of blanked sailings and service adjustments.

Despite persistent congestion at several major container hubs in Europe which typically puts upward pressure on container rates, Asia – Europe spot prices dipped slightly last week, possibly due to an increase in capacity as carriers shift transpacific vessels to these lanes.

Carriers are moving now-excess transpacific capacity to other trades like the transatlantic and Middle East too, which could further complicate a smooth restart of China – US volumes as vessels will be out of position.

With the current capacity management measures in place, despite the recent trade war induced volatility, carriers have succeeded in keeping rates about 50% higher than in 2019 on the major lanes with Red Sea diversions also helping to absorb capacity. But even so, rates on these trades are around 30% lower than last year due to fleet growth and increased competition between the recently launched carrier alliances.

Though a rapid return of container traffic to the Red Sea in the near future is probably still unlikely, President Trump’s announcement yesterday that the US reached a ceasefire deal with the Houthis is the most significant change to the status quo since the group pledged to only target Israeli ships during the Israel-Hamas ceasefire early this year. Houthi statements indicate they will cease targeting US vessels as long the US holds off attacks on Houthi positions in Yemen, but they promise to continue attacks on Israel and it is unclear what all this means for vessels from other countries.

Container carriers won’t return to the Suez until there is clarity and they feel assured of safe passage, but when they do resume traffic on this lane the shorter voyage will – after an adjustment period – release a significant amount of capacity back into the market, increasing the prospect that carriers will face oversupply and strong downward pressure on rates.

Following the US’s suspension of de minimis eligibility for Chinese goods last week, Temu announced it will no longer ship goods directly from China to US customers. This move implies a significant shift away from air cargo for China-US e-commerce and to ocean freight and domestic fulfillment in an effort to avoid tariffs as long as possible, reduce costs from air cargo, or shift the tariff burden to domestic sellers.

The B2C e-commerce shift away from air cargo has resulted in a sharp drop in China – US air volumes – as much as two million kilo per day – reflected in a 30% capacity decrease since the suspension. But as e-commerce shipments from these platforms traveled mostly in chartered freighters, as charter and other capacity is being removed from this lane, and as spot demand from other sectors – like many electronics exempt from tariffs for now – may still be relatively strong, spot rates have yet to collapse.

Freightos Air Index China – US rates eased only 5% last week to a still well above normal $5.28/kg. And as Temu and Shein shift some of their focus to other markets, carriers have started moving capacity to other lanes as well. This capacity shift may partly explain China – Europe rates falling to less than $3.50/kg last week, their lowest level since early March. Transatlantic rates of $1.90/kg are more than 20% lower than in late March, possibly from capacity additions as well.

Sebastien Podgorski, VP of Airline Solutions at WebCargo by Freightos, explains that since the lion’s share of the e-commerce effect was felt by charterers, many carriers are actually reporting a recent bump in volumes overall, driven partly by an ocean to air shift from shippers looking to beat tariff roll outs.