Freightos Weekly Update: Transatlantic ocean rates spike as surcharges take effect

Ceasefire talks that potentially could have yielded at least a partial reopening of the Strait of Hormuz quickly collapsed late last week and moved in the opposite direction, with a US naval blockade of Iran-linked traffic now in place. The few container vessels that have moved through – and any other that might manage to exit the Persian Gulf during the fragile pause – are probably unlikely to return to Gulf ports until carriers are confident the waterway is stable.

The Iranian closure has reduced global oil supply by 10% – with the added US blockade set to reduce energy flows further – and some countries are already taking measures to conserve stocks.

For the container market too, the biggest impact of the war has been on fuel costs and accessibility. Dwindling supply of bunker fuel in some Asian hubs is leading to reports of some ships switching to alternative ports, ironically using more fuel in the process.

Rising fuel costs have impacted container rates across the market, even for lanes where fuel availability is not yet a factor.

Emergency Fuel Surcharges and PSSs of between $500 – $1,000/FEU announced back in March for transatlantic shipments recently went into effect. Freightos Baltic Index transatlantic rates spiked 50% last week, climbing from $1,400/FEU to more than $2,100/FEU. Some carriers have scheduled more Europe – N. America rate increases for later this month or early May ranging from $1,000/FEU – $2,000/FEU.

Transpacific rates to the West Coast climbed a more modest 3% last week to about $2,500/FEU and East Coast prices increased 10% to $3,678/FEU, both about $700/FEU higher than before the war. Some carriers are aiming for additional price hikes ranging from $500 – $2,000/FEU for these lanes in early May, though carriers may face a challenge sustaining those prices if rate behavior since late February, including for Asia – Europe prices, is a guide.

Asia-Europe rates have increased relatively modestly since the start of the war – albeit during the typical low demand, low rate period across these east-west lanes – climbing $200 – $400/FEU. Prices to N. Europe dipped 4% to $2,800/FEU last week and Mediterranean rates were level at $3,800/FEU – but both are around $1,000/FEU or more below GRIs that were set for March and again for early April.

The National Retail Federation projects level US ocean import volumes through June, before a 5% increase on peak season demand starting in July. Estimated year to date volumes through August however, would be 3% lower than the same period last year.

That the latest NRF volume projections for the coming months have not deviated significantly from those made in early February – just before the Supreme Court invalidated IEEPA tariffs and the White House introduced a global 10% tariff based on Section 122 as a temporary measure until July – suggests that most shippers are not frontloading ahead of the July deadline when tariffs may climb again.

In the meantime, multiple parties are challenging the Trump administration’s current use of Section 122 – a law designed to address international balance of payment issue back when the US was still on the gold standard – in the same court that first struck down IEEPA just as the refund process for IEEPA tariffs is about to get underway.

In air cargo the war continues to impact fuel costs and availability, in addition to driving volume shifts and a capacity crunch.

The Middle East supplies about a fifth of the world’s jet fuel and prices have more than doubled since the Strait of Hormuz closure. Countries especially dependent on Gulf jet fuel or on refineries in China – which has stopped exporting jet fuel – are already taking steps to conserve.

Vietnam and Myanmar are running low, with Vietnam Airlines reportedly canceling 20% of its flights as a result and foreign airlines refueling elsewhere before landing. Cathay Pacific will cancel 2% of its flights starting in mid-May to conserve fuel and reduce costs. Europe could face similar shortages by as soon as May, and though N. America is less exposed to supply issues, carriers like Delta and United are also canceling a number of unprofitable flights due to higher costs.

The fragile ceasefire is not enough to entice non-Gulf carriers to resume Middle East flights, and even as Gulf carriers continue their gradual recovery, the total number of flights in and out of the region are an estimated 60% lower than before the war. A good share of Gulf carrier cargo capacity is via passenger flights, so a full recovery could be difficult as long as visitors stay away.

This capacity strain, climbing fuel prices, as well as a shift of volumes to alternative Asia – Europe routes continue to put upward pressure on rates across most lanes though the rate of ascent has slowed on some routes and prices on other lanes are past their peak for now as capacity follows volumes.

Freightos Air Index S. Asia – Europe rates of $5.15/kg are double their pre-war level and SEA – Europe prices are 60% higher at $5.30/kg with both continuing to climb last week. China – N. America rates meanwhile were level at $6.30/kg and only 7% higher than late February after climbing to a peak of more than $7.50/kg in late March.

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