Dive Brief:
- Ocean freight rates have continued to increase since the start of the Iran war in February, in part due to fuel charges stemming from the rising cost of oil, according to a Freightos weekly update from April 7.
- On the Asia to U.S. West Coast tradelane, rates were up 11% week over week to $2,420 per forty-foot equivalent unit, per the Freightos Baltic Index.
- Meanwhile, rates from Asia to the East Coast rose 5% from the prior week to $3,350 per FEU, according to Freightos.
Dive Insight:
The Iran war has been impacting global shipping flows and causing a rapid rise in fuel prices. However, the U.S. and Iran recently announced a two-week ceasefire, which only adds more uncertainty to the fluid situation.
The ceasefire includes safe passage through the Strait of Hormuz, a critical waterway for oil transport, but details are still emerging. “From a risk perspective we are likely to see vessels exit the Persian Gulf but be more cautious in entering the Gulf in case the ceasefire does not hold,” CEO of Vespucci Maritime Lars Jensen said in a LinkedIn post.
The two-week ceasefire will not restore container shipping operations through the Strait of Hormuz, Xeneta said in an April 8 press release, noting that carriers will likely be cautious moving forward.
“Strait of Hormuz transits are likely to increase but how this transition is managed is yet to be seen because two weeks is a very short window of opportunity and there is no guarantee the ceasefire will hold,” Xeneta Chief Analyst Peter Sand said in the release.
Ocean carriers are trying to mitigate cost impacts through several general rate increases and fuel and emergency surcharges. Maersk, Hapag-Lloyd and CMA CGM sought approval from the Federal Maritime Commission to implement surcharges before the 30-day notice requirement but were denied, according to multiple FMC filings dated March 23.
Despite the turmoil in the Middle East, the market remains relatively stable, experts say.
Earlier this year, it was expected that ocean carriers would face challenges to keep rates above last year’s levels due to their growing fleets and overcapacity. The sentiment has since changed as rates are 8% stronger than a year ago from Asia to the West Coast, according to Freightos.
While it is typical for there to be soft demand between Lunar New Year and peak season, rates have climbed, per Freightos. Usually, during this time period, rates are flat or begin to ease.
Capacity still exceeds the soft post Lunar New Year demand, per a Bluspark newsletter, and fleet growth continues, while utilization has not improved.
“For shippers, the takeaway is clear. This is not a new market. It is a different conversation around the same market,” according to Bluspark.
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