Rates for shipping containers from Asia to the US continue to face upward pressure amid an early start to peak season and the pulling forward of volumes to be new tariffs, but lower bunker fuel costs could help slow the increases.
Rates to both coasts from global logistics company Freight Right showed the largest increase this week, topping $6,000/FEU (40-foot equivalent unit) to the West Coast and $7,500/FEU to the East Coast, as shown in the following chart.
Robert Khachatryan, founder and CEO of Freight Right Logistics, said ocean freight rates from China to both North American coasts experienced a steep climb over the past week, driven by heavy volume increases in the first half of June.
“Carriers reported a significant spike in cargo volumes during the first half of June,” Khachatryan said. “This surge is largely attributed to shippers front-loading their inventory early to avoid peak-season bottlenecks, which directly triggered carrier GRI (general rate increases) implementations for the second half of the month.”
Another driver of the higher rates is a rush by importers to beat new tariffs planned by the administration after the US Supreme Court ruled against International Emergency Economic Powers Act (IEEPA) tariffs.
“The US actively advanced its strategy to replace expiring emergency surcharges with permanent Section 301 labor tariffs,” Khachatryan said.
Khachatryan said he expects sustained upward pressure and prolonged volatility.
“Shippers should abandon expectations for a quick rate correction,” Khachatryan noted.
Rates from online freight shipping marketplace and platform provider Freightos were flat to the West Coast and up by 4% to the East Coast, after showing a surge in rates the previous week.
Judah Levine, head of research at Freightos, said easing fuel costs are likely to reduce some of the upward pressure on rates in the near term that have kept prices higher year on year since the start of the war.
“But while reduced Emergency Fuel Surcharges (EFS) will be relevant for spot shipments, large shippers with annual contracts will still be paying higher rates via Q3 BAFs (bunker adjustment factors) even as fuel costs decline,” Levine said.
Levine anticipates softening rates once fuel prices normalize.
“We could expect freight rates to pick up where they left off before the war: downward pressure on prices from a growing fleet,” Levine added. “And if the peace deal hastens a broad carrier return to the Red Sea, that downward pressure will be even stronger.”
Container ships and costs for shipping containers are relevant to the chemical industry because while most chemicals are liquids and are shipped in tankers, container ships transport polymers – such as polyethylene (PE) and polypropylene (PP), which are shipped in pellets. Titanium dioxide (TiO2) is also shipped in containers.
They also transport liquid chemicals in isotanks.
Source: ICIS by Adam Yanelli
