The extended US peak season continues to reshape shipping demand, and two very different trends are emerging in the global freight market.
Asia-Europe ocean freight rates have begun to ease from their early-July peaks, but Transpacific rates remain surprisingly firm. At the same time, uncertainty around the Strait of Hormuz, ongoing attacks across key Middle East shipping corridors and increased fuel costs are putting additional pressure on international supply chains.
Hopes that the Strait of Hormuz might reopen soon have been dashed after Iran has reportedly increased its demands for traffic to resume. Demands include a ban on US vessels using the waterway, transit fees and compensation for damage caused by US strikes.
The move has returned the situation to a wartime status quo of Iranian attacks, a U.S. blockade and limited vessel movement thru the strategically vital waterway.
Security fears have also spilled beyond Hormuz. In recent weeks attacks linked to Iranian proxies have reached the Bab el-Mandeb Strait, Saudi ports in the Red Sea and even Egypt.
Despite a deteriorating security environment, some container shipping lines have resumed or increased Red Sea services that have been stopped several times since the conflict began.
Asia-Europe rates tumble from July highs
The ocean peak season, which came early, is now expected to be followed by a decline in Asia-Europe freight rates.
Carriers are blanking more sailings for August while cutting or canceling planned rate increases mid-month. Spot prices have dropped as well.
Rates have fallen some US$1,000 per FEU or some 15% from early July highs on both Northern European and Mediterranean routes.
Average prices dropped a further 8% week-on-week to around US$5,000 per FEU for Northern Europe and US$6,000 per FEU for the Mediterranean last week. The daily rates have continued to ease modestly at the start of this week.
Prices have since fallen back to around mid-June levels, but prices are still about US$2,000 per FEU above pre-peak-season demand levels that surged in mid-May.
The small fall suggests that demand is still high, but not at its highest. Upward pressure on freight rates remains from congestion at major Far East hubs and disruption caused by low water levels on the Rhine.
Transpacific goes in the opposite direction
Meanwhile, the Transpacific market has bucked the trend seen on Asia-Europe routes.
Rates first followed a broad pattern in line with Asia-Europe prices after the peak season started in late May. However, in recent weeks the two markets have clearly split.
Rates on the East Coast, which had been relatively stable after hitting around US$9,000 per FEU in early July, have climbed again. So far this week, prices have reached around US$9,400 per FEU.
West Coast rates have also rebounded. Prices have risen by about $1,300 per FEU since early August, after dropping thru much of July, possibly due to added capacity rather than softer volumes.
West Coast prices have fallen to around US$7,400 per FEU but are still US$200 per FEU below their July peak.
The durability of the Transpacific market has surprised many observers.
Earlier this summer, the National Retail Federation had forecast a sharp peak in US container arrivals in July followed by a significant decline thru August and September. That view has since been amended, with demand now expected to stay high and be more spread out evenly thru September.
One factor may be how shippers act after the expected July deadline for tariffs. Some companies that had rushed shipments ahead of the deadline may now be dragging their feet on ordering activity after the expected sharp rise in duties failed to materialize.
Other shippers may have previously postponed their peak season orders amid economic uncertainty but are now ramping up shipments as consumer demand proves more resilient than expected, despite continued inflationary pressure.
Airfreight also feeling the squeeze
The changes in the ocean freight markets are also mirrored in airfreight.
Rates on a number of major airfreight routes have rebounded in recent days, particularly for shipments in higher weight brackets, according to Freightos Air Index data.
The rise is likely to be partly due to higher emergency fuel surcharges after the collapse of the ceasefire saw jet fuel prices rise.
Airfreight rates from China to North America rose 6% last week to about US$6.00 per kilogram, while rates from China to Europe increased 2% to some US$4.11 per kilogram.
The different developments in the key trade lanes are a reminder of how geopolitical risks, tariff uncertainty, port congestion, fuel prices and changing shipper behavior are still shaping the global freight markets.
The current environment is making the traditional seasonal pattern harder to predict for logistics operators and cargo owners, with ocean and airfreight markets responding differently to the same mix of geopolitical and economic pressures.
