Container rates are beginning to subside, following an early holiday peak season triggered by shippers rushing to import their goods ahead of turbulent tariffs, high oil prices, and the continuing Iran War.
The change began as spot rates on major ocean container shipping trades from Far East to U.S. and Europe softened this week in a sign the triple-digit percentage spikes caused by the Middle East conflict appear to have peaked, according to a report from Xeneta.
By the numbers, the average rate for the Far East to U.S. West Coast is down 5% week-on-week and Mediterranean is down 2%, while U.S. East Coast and North Europe are both down 1%, with further decreases expected, the firm said in its Xeneta Weekly Ocean Container Shipping Market Update.
However, those small decreases mark only baby steps in the long road to a return to pre-war shipping rates, according to Emily Stausbøll, Xeneta Senior Shipping Analyst.
“It is too early to call this a sustained decline and spot rates remain massively elevated compared to pre-crisis levels – Far East to U.S. West Coast is still up 252% since the end of February. Increasing military strikes between Iran and the U.S., while not translating directly into higher freight rates, could also pause the softening if the situation deteriorates further,” Stausbøll said.
“Shippers pulled forward volumes at the start of peak season to avoid expected Q3 bunker adjustment factor increases and protect supply chains from the Middle East disruption rippling across global trades. The irony is this frontloading contributed to a capacity squeeze that then pushed spot rates higher than they likely would have been otherwise. Shippers will understandably take action to protect supply chains in the face of threats such as the closure of the Strait of Hormuz, but this can make the situation worse,” she said.
“The frontloading means peak season effectively started in May this year rather than July and, logically, will also be over sooner in the absence of underlying growth in container shipping demand. This, combined with increasing offered capacity, is perhaps why we are starting to see a softening in rates. Shippers who had to move goods to protect supply chains have done so. Those with the luxury of waiting may now hold off in the hope that rates come down further,” said Stausbøll.
