Weekly highlights

Ocean rates – Freightos Baltic Index

Asia-US West Coast prices (FBX01 Weekly) increased 4%.

Asia-US East Coast prices (FBX03 Weekly) increased 3%.

Asia-N. Europe prices (FBX11 Weekly) stayed level.

Asia-Mediterranean prices(FBX13 Weekly) decreased 8%.

Air rates – Freightos Air Index

China – N. America weekly prices increased 3%.

China – N. Europe weekly prices decreased 6%.

N. Europe – N. America weekly prices increased 1%.

Analysis

Iran has continued to allow some vessels to transit the otherwise closed Strait of Hormuz for countries coordinating with and possibly paying a toll to Iran. This development includes two 19,000 TEU COSCO container vessels which had been stuck in the Persian Gulf since the end of February. COSCO – possibly not coincidentally – also just restarted accepting bookings to Gulf ports.

The Houthis fired missiles at Israel over the weekend, marking their first attacks since the start of the war in Iran, but so far have not targeted vessels in the Red Sea. The Strait of Hormuz transits take place alongside continuing attacks even on anchored ships in nearby waters, and on ports in the region – including some being used as alternatives to inaccessible container hubs in the Gulf. Maersk reports that a drone strike on the Omani port of Salalah on Saturday has meant suspended operations there, with service set to resume partially today.

Gulf-bound containers using these alternative ports also continue to face long delays from vessel bunching and from endemic challenges to the new landbridges in the form of trucking capacity shortages, insufficient road infrastructure, and border-crossing complications. And while these new routes are enabling critical goods to move to and from the Gulf states, their limitations make them more an emergency stopgap than a viable full alternative.

Beyond Gulf volumes, the broader container market continues to be unaffected operationally from the Strait of Hormuz closure. But the rising price of oil and the challenges to fuel availability mean higher costs for carriers – which Hapag-Lloyd estimates at $40 – $50 million a week – and have triggered a wave of emergency fuel surcharge, PSS and GRI announcements.

Many of these aren’t set to take effect until April, but some fuel surcharges ranging from $300 – $500/FEU from several carriers were scheduled to start from mid-month and through last week, as were some GRIs.

Transpacific container rates have increased only $200/FEU since the start of the war, with Asia – Europe prices up $500/FEU to $2,900/FEU to N. Europe. To the Mediterranean, the current rate of $3,800/FEU is just $100 higher than before the war, though prices had climbed to about $4,300/FEU earlier in the month. These Asia-Europe levels are both about $2k – $3k/FEU lower than GRIs set for last week by some carriers.

Taken together, container rates have not spiked yet on the Strait of Hormuz disruption, and mostly have not climbed fully in line with announced increases so far. The container market is now in its slow season, and all things being equal, rates would typically ease this time of year. That these price increase attempts are being made during a low demand period, and with capacity levels still high across the market, may mean that the upward pressure on prices is more keeping spot rates from falling than pushing them up very much. The coming weeks will reveal whether carriers choose to introduce – or whether the market accepts – the additional planned price hikes.

In trade war news, ahead of the May US-China summit China has initiated probes into US trade practices – possibly repeating its October playbook of creating leverage by mirroring US moves, as the US administration recently announced Section 301 investigations on countries including China. Meanwhile, there were more signs of progress – combined with confusion and frustration – around IEEPA tariff refunds.

In air cargo, the Gulf carriers continue to restore flights and freighter capacity to the market, with Emirates SkyCargo now describing its operations as stabilizing, and Qatar Airways Cargo gradually continuing its rebound, which had a much later start.

Even so, global capacity remains constrained and a good share of Asian export volumes are still rerouting via the Far East instead of through the Gulf-carrier hubs. Taken together, even though demand is lower than last year, rates are higher because of constrained capacity, volume shifts and fuel surcharges as high as $2.00/kg on some lanes.

The Freightos Air Index global benchmark is 22% higher than a year ago, and rates on key lanes remain elevated compared to before the start of the war in Iran. But as European and Far East carriers add direct Asia – Europe flights, and as Gulf carriers recover schedules, prices are stabilizing, or even easing on some lanes:

Freightos Air Index S. Asia – Europe rates are 65% higher than at the end of February, but have dipped 1% since last week, with SEA-Europe prices 26% higher than before the war, but 6% lower than a week ago.

Weekly highlights

Ocean rates – Freightos Baltic Index

Asia-US West Coast prices (FBX01 Weekly) increased 3%.

Asia-US East Coast prices (FBX03 Weekly) increased 4%.

Asia-N. Europe prices (FBX11 Weekly) stayed level.

Asia-Mediterranean prices(FBX13 Weekly) stayed level.

Air rates – Freightos Air Index

China – N. America weekly prices increased 9%.

China – N. Europe weekly prices increased 25%.

N. Europe – N. America weekly prices stayed level.

Analysis

The number of vessels transiting the Strait of Hormuz remains minimal, though it has increased in the last week as Iran announced it is allowing non-enemy vessels to pass.

Container traffic to the Gulf States has found alternate but ultimately insufficient routes. Most carriers are relying on ports on the west coast of India as tranship hubs and shuttle services to accessible ports in Oman and the UAE – with some also using north Red Sea transits to Jeddah, especially for volumes out of Europe – and road transport on to the final destinations.

But these port and road alternatives are not designed to handle these types of volumes, and in addition to the expense – Freightos Terminal shows Shanghai – Jebel Ali rates are now above $7,000/FEU – the routes are being plagued with delays and congestion. Vessels arriving at the UAE’s Khor Fakkan port are reportedly facing more than week-long waits for a berth with some being turned away, and truck shortages are delaying road transport as well.

But even as we approach a month since the start of the war, the container market beyond the Gulf region has not faced operational disruptions. And so far, container rates on the major lanes haven’t increased much either, with transpacific prices up just 3% last week to $2,100/FEU to the West Coast and 4% to $3,100/FEU to the East Coast. Asia – Europe rates were unchanged at $2,870/FEU to N. Europe and $4,264/FEU to the Mediterranean.

Carriers have announced emergency fuel surcharges across lanes ranging from $200 to $500/FEU most of which will only go into effect in the coming days. They have also announced a long list of PSSs and GRIs – most set for early April – for non-Gulf lanes, including about $2,000/FEU rate increases for Asia – Europe lanes, though CMA CGM recently reduced its increase by about $700/FEU.

So container rates may be set to climb on across the board fuel surcharges soon, and possibly spike more significantly via other rate increases on some lanes to start April too. But there are some signs of pushback against the Strait of Hormuz closure driving rates up too far on non-impacted lanes.

Besides shipper concerns that contracted BCOs who pay the emergency fuel surcharges may be double charged when BAFs are updated for Q3, the US FMC just rejected an early-March request by some carriers to waive the 30-day notice period for fuel surcharges because carriers did not provide data showing that the rate increases were reasonably related to cost increases. Indian authorities have also opened a streamlined channel to hear complaints of predatory logistics pricing.

Carriers – after a tepid post-Lunar New Year period from a volume perspective – are also facing the challenge of slumping demand as slow season begins. Rate behavior in the next few weeks then, should reflect which rate increases carriers try to introduce, and their degrees of success.

In air cargo, Gulf carriers continue their gradual schedule recovery. Qatar Airways – whose Doha operations were largely suspended since the start of the war as airspace was closed – started a partial reopening this week including about forty five weekly freighter flights, alongside many passenger services as Qatari airspace starts to reopen. The UAE began reopening its airspace soon after the war began, with Emirates Skycargo announcing more than 150 scheduled freighters for this week.

But despite the continued Gulf carrier capacity recovery and European and Asian carriers adding Asia – Europe flights, capacity out of the Middle East, and Asia – Europe tonnage are still much lower than a year ago.

Air rates which had spiked on many Middle East lanes, and Asia – Europe routes early in the war – as capacity out of the Gulf dropped and volumes shifted to direct Asia – Europe services – had leveled off last week. This week though, rates on some lanes have started climbing again, possibly reflecting the first reports of backlogs developing across major hubs, and updated fuel surcharges as fuel costs continue to rise. South East Asia – Europe prices up 17% since last week to more than $5.00/kg, China – Europe rates up 23% to $5.00/kg too, China – US prices up 9% to $7.43/kg and Europe – Middle East rates up 14% to $3.18/kg.ant factor to capacity and rate levels.