Weekly highlights
Ocean rates – Freightos Baltic Index
Asia-US West Coast prices (FBX01 Weekly) increased 9% to $5,994/FEU.
Asia-US East Coast prices (FBX03 Weekly) increased 11% to $7,099/FEU.
Asia-N. Europe prices (FBX11 Weekly) increased 6% to $2,925/FEU.
Asia-Mediterranean prices (FBX13 Weekly) increased 13% to $4,846/FEU.
Air rates – Freightos Air index
China – N. America weekly prices stayed level at $5.29/kg.
China – N. Europe weekly prices increased 2% to $3.81/kg.
N. Europe – N. America weekly prices fell 1% to $1.85/kg.
Analysis
The Israel – Iran conflict that broke out late last week has so far not had a significant impact on freight markets.
One major concern is that Iran could close the Strait of Hormuz – through which normal movement continues for now – disrupting the estimated 20% of global oil supply that flows on tankers through the waterway, increasing oil prices and creating international pressure on Israel. Iran may hesitate to do so though, both because their oil exports are dependent on the Strait and because there may be sufficient supply at the moment to blunt any impact on fuel prices.
Only 2% – 3% of global container volumes transit the Strait of Hormuz, so disruptions to the container market would be felt primarily in the Middle East. But closure of the strait would cut off access to Dubai’s Port of Jebel Ali, a major transhipment hub between the Far East and points to the west. Tranship volumes would need to be shifted elsewhere, possibly to South Asian hubs, which could cause congestion and higher freight rates. Israeli container carrier ZIM Lines reports that operations at Israel’s Haifa and Ashdod ports are normal despite Iranian missile and drone attacks.
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Linking the Israel-Iran war and the US trade war, President Trump left the G7 meeting in Canada a day early to focus on developments in the Middle East. Other than progress finalizing a US agreement with the UK, Trump leaves the summit without trade deals with G7 members even as the July expiration of the reciprocal tariff pause for these countries nears.
The US is reportedly close to a trade deal with Pakistan, but Trump said the US may choose to unilaterally set tariff rates for many other countries if agreements are not in place in time. Other officials suggested the White House could extend pauses for countries with negotiations underway and progressing in good faith.
A federal court ruled that Trump tariffs voided by a US trade court in late May can remain in effect through the appeals process. The court intends to hear arguments on July 31st, which means the tariffs likely will remain valid at least through the August 12th expiration date set for the lowered US levies on China – and possibly beyond, as an appeal to the Supreme Court is also expected.
The biggest trade development last week came via statements from President Trump that the US and China have tentatively agreed to terms for a new trade deal, though the administration indicated that the agreement would keep the current 30% minimum tariff on Chinese goods and China’s 10% tariff on the US in place.
US shippers have been frontloading peak season goods since the May 12th China-US deescalation in anticipation that tariffs could climb again in August. Until a deal is actually signed, the early peak season rush is likely to continue, with the most recent NRF container volume forecast suggesting that the strongest post-May 12th period of demand may already be coming to a close.
If a China-US deal does materialize soon – and shippers are convinced it will stick – we could see some reduction in urgency and further easing in demand as, stuck with 30% tariffs, shippers spread out volumes across the more typical peak season months into October. But that arrivals in this year’s peak season peak month of July are expected to be lower than in April suggests that some of the frontloading to date will come at the expense of volume strength for the rest of the year, deal or no deal.
As such, there are indications that transpacific container spot rates may have already peaked too, meaning market conditions will not be there to support carriers’ announced June 15th and July 1st GRIs.
Despite sharp climbs last week, the latest FBX daily transpacific spot rates to the West Coast are already 3% lower than last week’s average. And if mid-month GRIs are abandoned or prove unsuccessful, easing rates may reflect both some decrease in demand relative to volumes since the mid-May rebound, and the recent increase in capacity on these lanes.
Carriers rushed to reinstate the transpacific sailing and services they suspended during the April-May lull – much of which have by now returned to the lane. Anticipation of a surge in demand – and freight rates – ahead of the August deadline also drove many alliance carriers to schedule additional sailings and once again attracted regional carriers to the lane. But this combined capacity bump may have overshot current demand levels, with reports of canceled ad hoc sailings and vessels departing half full supporting this hypothesis and the possibility that rates are likely to ease.
Some of the capacity additions to the transpacific came via capacity subtractions from other lanes, including from Asia – Europe. Together with capacity reductions and port congestion – though delays are easing – the start of Asia – Europe peak season demand may be supporting spot rates that are up 24% so far in June to about $3,000/FEU, and rates could climb further on mid-month GRIs.
Prices of $4,846/FEU from Asia to the Mediterranean last week were up almost 50% compared to the end of May. Daily rates so far this week though are down to about $4,500/FEU and may reflect reports of overcapacity on Asia – Mediterranean trade.In air cargo, China – US rates were level last week at $5.29/kg. This price is down slightly from the bump to about $5.40/kg seen in late May and early June, which was likely due to a quick increase in demand and some frontloading when the US reduced tariff levels for China. Carriers continue to shift capacity to other lanes as China-US e-commerce volumes have dropped, though despite reports that services are being added to trades like Asia – Europe, so far rate levels remain stable.
