Weekly highlights

Ocean rates – Freightos Baltic Index

Asia-US West Coast prices (FBX01 Weekly) increased 1%.

Asia-US East Coast prices (FBX03 Weekly) increased 9%.

Asia-N. Europe prices (FBX11 Weekly) increased 10%.

Asia-Mediterranean prices (FBX13 Weekly) increased 15%.

Air rates – Freightos Air Index

China – N. America weekly prices decreased 6%.

China – N. Europe weekly prices increased 13%.

N. Europe – N. America weekly prices decreased 2%.

Analysis

Iran has kept up its attacks on vessels attempting to transit the Strait of Hormuz this week. In recent days though, those strikes broadened to include even non-transiting vessels in the Persian Gulf or Gulf of Oman as well as a broader selection of ports in the region. Iran is allowing a small number of select vessels – from Iran and from countries like China, Pakistan and India – to transit, suggesting a verification process is now in place.

President Trump is lobbying the international community to help secure the passage via naval escorts, though there is broad skepticism that military protection would be effective or be able to move more than 10% of typical traffic. In any case, he is finding very few takers, and, from a container perspective, even if the plan moves forward, these resources would be deployed for oil and LNG tankers. 

For the container market, operational disruptions continue to be limited to Gulf-bound or originating cargo, with some knock-on congestion elsewhere. As in previous disruptions like the Red Sea closure, carriers are now adjusting to the new reality and freight is finding its way. 

After initially suspending bookings to the Persian Gulf, carriers like CMA CGM and Maersk are now accepting new bookings by diverting volumes to alternative accessible ports in the region – including ports in Oman, UAE, and Saudi Arabia – with containers moving on by landbridge. Carriers are also relying heavily on ports in India with new shuttle services ferrying containers to those accessible Mideast ports – though even some of these, like UAE’s Fujairah are now being directly targeted by Iran. 

Congestion is already building at these alternative ports as well as in India, with reports that the Port of Colombo in Sri Lanka is declining to absorb Gulf-bound volumes because of pre-existing congestion. 

For the rest of the container market, while operations are unaffected by the war, container rates are not likely to be spared. 

Carriers have announced flat-rate global emergency fuel surcharges of several hundred dollars per FEU that will go into effect early next week. Ocean expert Lars Jensen observes that prolonged fuel fees like these would push rates up, but they would not represent unprecedented fuel pass throughs, and would be “expensive, but not destructive” to the market, possibly pushing rates back up to 2024 levels. 

But while initially it seemed non-Gulf lanes would only be impacted by fuel surcharges, by mid-last week carriers announced a flurry of significant emergency surcharges, PSSs and GRIs across a range of lanes, including Asia – Europe and the transatlantic, some representing thousands of dollars in increases per container.  Carriers like Maersk report facing additional costs not just in the price of oil, but in disruptions to fuel supply access, which may be a culprit in carriers looking to increase rates across lanes not directly impacted by the Strait of Hormuz closure.

As fuel surcharges and the other rate increases will not go into effect for a few more days, container rates have so far not risen too notably, and likely just reflect carrier hopes for a post-Lunar New Year bump.  Transpacific rates increased 1% to about $2,000/FEU to the West Coast, and 9% to about $3,000/FEU to the East Coast last week, and have been about level so far this week. Asia – Europe prices climbed 10% to $2,900/FEU to N. Europe and 15% to $4,300/FEU to the Mediterranean and likewise have been stable since. 

Even if rates do rise sharply on surcharges and GRIs next week, there is some skepticism that market dynamics will see these increases succeed fully. Similarly, there are reports that BCOs in the midst of annual ocean contract negotiations are pushing back against carrier fees associated with Iran war disruptions that do not directly impact these shippers’ volumes. 

In some overlap between the trade war and the war in the Middle East, President Trump – who had said he would postpone his end of March summit with China if China refused to help secure the Strait of Hormuz – announced he has asked to delay the meeting for a month in order to focus on the war with Iran.

At the same time, US steps to restore IEEPA tariffs by other means continue – even as the IEEPA refund process gains steam –  with China, Singapore and Thailand mentioned as subjects of Section 301 excess manufacturing capacity probes which reportedly will be completed before the Section 122 tariffs expire in July. And while it seems many US trading partners are pushing the US to stick to the agreed upon IEEPA tariff levels even if installed by other laws, they are at the same time objecting to the accusations of excess capacity abuses.

In air cargo, disruptions to a broad swath of the market continued this week as Iran persists in its attacks on regional airports which serve as hubs for major cargo players like Emirates Skycargo and Qatar Airways Cargo, and as a crucial global connection point, especially for Asia – Europe lanes. 

While Qatari airspace remains closed, and Qatar Airways’ Mideast operations along with it, the UAE has gradually restored flight schedules after being closed completely during the first few days of the war and despite ongoing drone and missile attacks. Just this past week the airport in Dubai faced multiple attacks, some of which closed the airport for several hours.

With the drop in available capacity out of these Gulf hubs and the increase in Asia volumes looking for alternate routes to Europe, Freightos Air Index rates have spiked on many of these lanes. South Asia – Europe prices climbed to $4.72/kg as of today, 84% higher than just before the war began, with South East Asia – Europe rates up 26% to $4.23/kg and Europe – Middle East prices up 57% to $2.82/kg, with some of these increases likely partially due to fuel surcharges being rolled out by some carriers. 

That being said, while rates had climbed sharply for the first week or so following the airspace closures, in the last few days prices have leveled off or even cooled slightly on many of these lanes. This shift may reflect some capacity recovery by Emirates, as well as Etihad, or the addition of direct Asia – Europe capacity by European airlines and carriers from the Far East.

But as Qatar Airways remains mostly grounded for services in and out of Doha, about 5% of global capacity is still absent from the market and is likely still an important factor to capacity and rate levels.