Spot rates on the benchmark trans-Pacific ocean shipping trade have increased by double-digits in just the past month, as the conflict in the Middle East drives downstream effects to the other side of the globe.
“On U.S.-bound trades from the Far East, freight rates are still elevated from one month ago as disruption in the Middle East continues to have a cascading effect through Southeast Asian transshipment hubs,” said analyst Peter Sand of shipping platform Xeneta, in an update. “Shippers moving cargo to the U.S. via these hubs are paying the price for bottlenecks created thousands of miles away.”
Xeneta market average spot rates as of April 23 from the Far East to the U.S. West Coast were $2,857 per forty foot equivalent unit (FEU), and $3,871 per FEU to the East Coast.
“Far East to U.S. West Coast spot rates are up 22% over the past month, while Far East to U.S. East Coast are up 19%,” Sands said “Even the trans-Atlantic from North Europe to U.S. East Coast – which does not call at Asia transshipment hubs or Middle East ports – has surged 46% compared to one month ago.
“The crisis is still very much present – it has simply migrated from the regional to the global.”
Sand noted that the ongoing Middle East conflict has forced carriers to build entirely new service networks with little to no warning, including rerouting via land bridges such as Jeddah and alternative ports on the Indian Ocean coastline.
“On the European ocean container shipping trades, these new routing patterns are now established and carriers have reorganized capacity, meaning freight rates are easing from the spike in the immediate aftermath of conflict.
“Compared to one month ago, average spot rates from the Far East are down 6% to North Europe and 13% to [the] Mediterranean.”
But he cautioned that the softening of rates on the European trades isn’t necessarily a sign that the market is returning to normal.
“The Strait of Hormuz remains effectively closed to container shipping, the ceasefire is fragile and, while the alternative routing arrangements that carriers have put in place are stabilizing supply chains, they are still costly workarounds.
“Until there is greater assurance of safe and free passage for ships in the Strait of Hormuz, the underlying drivers of disruption – longer transit times, reduced schedule reliability, congestion at alternative hubs, and elevated surcharges – will continue to hold freight rates above pre-crisis levels.”
Over the weekend, Iranian Foreign Minister Abbas Araghchi during his tour of the region and Pakistan gave regional mediators a new offer to cease attacks on shipping in exchange for an end to the war, including the U.S. naval blockade of Iranian ports and the postponement of nuclear negotiations. The development was reported by the Wall Street Journal, citing officials familiar with the matter.
Meanwhile, Sand said ocean carriers are managing capacity to shore up falling rates in Europe while also keeping U.S.-bound trades tight.
Sand said four of the five major fronthaul trades saw capacity decline,with Far East to North Europe down 6.6%.
“That combination of crisis-driven congestion and deliberate supply management is why rates remain elevated across the board, even where the direct impact of the conflict should be limited,” he said.
Read more articles by Stuart Chirls here.
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