Freight rates on the benchmark Asia-United States trade lanes remain above pre-war levels, but that’s due more to capacity manipulation by carriers than increasing demand. The weekly Freightos Baltic Index shows trans-Pacific rates around $1,000 higher per forty foot equivalent unit (FEU) than before the start of the Iran war in late February.
Asia-U.S. West Coast prices increased 4% to $2,828 per FEU for the week ended May 8. Asia-U.S. East Coast prices were just 1% higher, at $4,340 per FEU. These increases are largely driven by carriers looking to shore up higher spot rates during a period of low demand.
Capacity manipulation is a significant factor in driving trans-Pacific rates above pre-war levels. Carriers are planning additional, likely modest, increases for mid-month, stepping up blanked sailings amid reports of east-west service space tightening and some scheduled containers being rolled – or bumped – to a later voyage.
The closure of the Strait of Hormuz is adding about $500 million per month in costs that carriers have so far passed on in freight rates. This has led to increased fuel costs, which could become the top priority for carriers in the coming months.
Analysts predict a muted trans-Pacific peak season, with June volumes projected 2% below May and July only 4% higher before easing again. This suggests importer caution and a potentially weak second half for carriers still facing high fuel costs.
The U.S.-based National Retail Federation outlook highlights the challenges faced by carriers in the coming months. With fuel costs continuing to rise, carriers will need to navigate these increased expenses while maintaining spot rates.
The impact of the Iran war on trans-Pacific freight rates is clear. However, it's also important to note that capacity manipulation by carriers has played a significant role in driving rates above pre-war levels.
As carriers continue to navigate these challenges, it's essential to consider the long-term implications for the industry. With fuel costs expected to remain high, carriers will need to adapt and innovate to maintain competitiveness.
The current market dynamics highlight the need for greater transparency and cooperation among carriers, shippers, and other stakeholders. By working together, the industry can better navigate these challenges and ensure a stable supply chain.
Capacity manipulation by carriers is driving trans-Pacific rates above pre-war levels.
