The war involving Iran is driving bunker fuel prices back toward levels last recorded in mid-year, raising the cost floor for container shipping even as trans-Pacific spot rates begin to show early signs of easing from their peak-season highs.
Higher fuel costs are expected to maintain upward pressure on the underlying cost of moving containers. However, ocean freight prices continue to be influenced primarily by demand patterns and disruptions affecting available capacity.
Tensions between Iran and the United States continue to intensify around the Strait of Hormuz. Iran has announced plans to impose a broader exclusion zone covering areas near the strategic waterway, according to shipping analyst and SONAR data contributor Freightos (NASDAQ: CRGO).
Bunker fuel prices have been rising since the ceasefire collapsed in July. Recent escalations, combined with an increase in Chinese crude oil imports, have now pushed fuel costs back toward levels last seen in June.
Across the trans-Pacific, ocean freight rates edged down slightly last week. The movement suggests that another round of increases may not be imminent, particularly with what is likely to be the final few weeks of the peak season approaching.
Nevertheless, demand that accelerated in late May has kept trans-Pacific prices at peak-season levels since the beginning of July.
Current rates stand at approximately $7,600 per unit for shipments to the U.S. West Coast and $9,500 for the East Coast. Those levels are broadly comparable with prices recorded during the 2024 peak season, when strong seasonal demand, capacity disruptions linked to the Red Sea crisis and frontloading ahead of a potential East Coast labor strike combined to drive rates sharply higher.
Congestion caused by severe typhoons at container hubs across Asia is also likely playing a role in sustaining current freight rates. Carriers have announced an increase in blanked sailings for this week, potentially as part of efforts to restore schedules disrupted by the storms.
That reduction in available capacity could help keep prices elevated even if demand has begun to moderate.
Panama Canal trims transits, delays deeper draft cut
The Panama Canal Authority has postponed, until further notice, an additional half-foot reduction in the permitted draft for Neopanamax transits.
The authority remains cautious about potential drought conditions associated with the expected El Niño this year. Daily transits were reduced by four this month, bringing the total to 32 per day. However, the number of Neopanamax slots used by long-haul container vessels has been reduced by only one per day.
Mediterranean lanes ease faster than North Europe
Asia-Europe container rates also moved slightly lower last week, reaching approximately $4,500 to North Europe and $4,700 to the Mediterranean.
Mediterranean rates have since fallen further this week and are now roughly in line with North Europe prices. Historically, however, the difference has generally been much wider. Since 2017, Asia-Mediterranean rates have averaged 17% more than Asia-North Europe rates, although Mediterranean prices have occasionally fallen below those of the North European trade.
The more pronounced decline in Mediterranean rates from their peak-season highs may reflect several factors.
Mediterranean rates have dropped by approximately $2,600, or 37%, while the decline on North Europe lanes has been around $1,300, or 23%. The sharper fall in the Mediterranean could partly reflect the recent increase in Red Sea transits on some Mediterranean services.
At the same time, congestion at North European hubs continues to exert upward pressure on rates in those trades, even as peak-season demand begins to fade.
Despite the recent declines, freight rates on both routes remain approximately $1,000 to $1,700 above pre-peak-season levels. Congestion across the Far East is likely contributing to that continued premium.
Recent strikes by port workers in Germany and the Netherlands are also adding to existing backlogs, further complicating the recovery of vessel schedules and keeping pressure on European container shipping markets.
