WEBVTT
00:00:00.000 --> 00:00:04.879
Hey everybody, welcome to this week's edition of Container Bites from Fritos.
00:00:05.360 --> 00:00:07.440
I am Judah Lean, head of research.
00:00:07.519 --> 00:00:11.279
It's gonna be just me this week as Julia is out on vacation.
00:00:11.439 --> 00:00:13.439
So let's jump right in.
00:00:13.759 --> 00:00:22.079
If we start uh once again with what's going on in the Street of Hormuz, last week it seemed like we were getting pretty close to some sort of agreement.
00:00:22.239 --> 00:00:35.679
Iran and Oman had made announcements that they were getting close to an arrangement that would have Iran control entry into the strait and into the Persian Gulf and Oman control exits.
00:00:35.920 --> 00:00:46.799
It seems like this was kind of imminent, but since then it's basically fallen apart, maybe not from the Oman-Iran side, but because of additional uh demands that Iran is making of the U.S.
00:00:46.960 --> 00:00:49.039
Because basically this would be contingent on the U.S.
00:00:49.119 --> 00:00:51.200
removing their uh blockade.
00:00:51.520 --> 00:00:55.759
Iran has reportedly released a list of demands of the U.S.
00:00:55.920 --> 00:00:59.759
to have the strait open, which included a ban on U.S.
00:00:59.840 --> 00:01:06.480
and Israel-linked vessels, transit fees for vessels from certain countries, as well as reparations from the U.S.
00:01:06.560 --> 00:01:09.040
for damage caused during uh U.S.
00:01:09.120 --> 00:01:10.959
strikes during the course of this war.
00:01:11.200 --> 00:01:17.280
Um, and all that seems to have really pushed hoax back down that the strait is going to open soon.
00:01:17.519 --> 00:01:22.319
We're really kind of back to the wartime status quo, which is very few transits, U.S.
00:01:22.480 --> 00:01:25.840
a blockade, periodic uh attacks on vessels.
00:01:25.920 --> 00:01:34.159
Um, and that's kind of back where we are, although there are statements kind of every day indicating that a deal is imminent, but so far those haven't materialized.
00:01:34.400 --> 00:01:42.879
One interesting development alongside this is that we've seen additional steps from carriers to increase transits through the Red Sea.
00:01:43.120 --> 00:01:54.799
Now we know that the Houthis have been threatening transits through the southern part of the Red Sea, the Baba Mondeb Strait since the beginning of the war, but hadn't really attacked any vessels since then.
00:01:54.959 --> 00:02:06.799
Uh, but just in the last few weeks there has been an escalation, and this is really because of an escalation related to the Iran war, but more directly between Saudi Arabia and the Houthis, which is a conflict that has extended for several years now.
00:02:06.959 --> 00:02:15.439
The Houthis have been, uh have attacked vessels linked to Saudi Arabia and said that they will attack the vessels that are making port calls in Saudi Arabia.
00:02:15.599 --> 00:02:20.639
Um, even so, even though there's kind of an escalation there, where you've seen these additional steps.
00:02:20.800 --> 00:02:33.520
As we've said before, CMACGM has been transiting through um when most other carriers had stayed away from the uh Red Sea and they're continuing to kind of restore or increase some of the sailings through the Red Sea.
00:02:33.599 --> 00:02:39.039
Now we have Hapag Lloyd and the MERS reinstating some of those sailings and also Kraska.
00:02:39.280 --> 00:02:53.439
So we have you know several steps by several carriers back towards the Red Sea, and this may be a beginning of a more general return, although again we've seen these stop and starts before related to what's going on with the with the conflict in Iran.
00:02:53.520 --> 00:03:02.080
So this is another kind of source of uncertainty, but maybe an encouraging step to see carriers willing to start going back, even though there's this you know conflict continues.
00:03:02.319 --> 00:03:04.719
What is all this meant for container rates?
00:03:04.879 --> 00:03:06.719
The answer is really not much.
00:03:06.960 --> 00:03:17.680
The street of Hormuz closure, the big impact is on the price of oil and therefore the price of fuel, and that's probably setting or impacting the floor for where container rates will go.
00:03:17.759 --> 00:03:28.319
But for now, as we've said, really since late May or at least the beginning of June, container rates have been driven by peak season trends, and that's where we still are.
00:03:28.400 --> 00:03:36.000
So, as we've said, there was an early start to peak season this year for various reasons related to straight of hormones and price increases that were coming there.
00:03:36.159 --> 00:03:45.199
And because peak seasons start early and rates increase very, very early already by early June, there is the anticipation that rates might start cooling early as well.
00:03:45.360 --> 00:03:49.120
The peak season might start um easing earlier than usual as well.
00:03:49.199 --> 00:03:51.199
And that seems to be the case for Asia Europe.
00:03:51.759 --> 00:04:01.840
Carriers now are increasing blank sailings for August, they're canceling or reducing uh planned mid-month rate increases in August as well, and spot rates are falling too.
00:04:01.919 --> 00:04:11.520
So prices have eased about$1,000 and about 15% for both Asia to North Europe and the Mediterranean since reaching the peak in early June.
00:04:11.680 --> 00:04:14.960
Last week's averages decreased 8% week on week.
00:04:15.199 --> 00:04:19.759
And now there are about$5,000 to North Europe and$6,000 to Mediterranean.
00:04:19.920 --> 00:04:23.839
Daily rates so far this week are also easing uh slightly, but at about that level.
00:04:24.000 --> 00:04:34.480
So these price levels are back to mid-June levels, but they're still about$2,000 per FEU, higher than they were before peak season demand started in mid-May.
00:04:34.720 --> 00:04:38.879
So the fact that rates aren't kind of cooling more significantly might point to a couple of things.
00:04:39.040 --> 00:04:48.319
One might be that you know demand is still elevated, but not at kind of the peak levels it was earlier in the summer, but also that congestion is really a factor now.
00:04:48.399 --> 00:05:06.959
So there's both congestion in some of the hubs in Europe that are dependent on the Rhine River for uh inland transportation, and that might be causing a backlog of containers at these ports because water levels for the Rhine are extremely low right now due to drought, and that's causing some backlogs there.
00:05:07.120 --> 00:05:26.079
And the other, and this is true uh across lanes, dependent on the Far East, has been just a series of typhoons, three really significant typhoons over the last month or so that have continued to batter some of the major hubs, including Shanghai in the Far East, and those causing serious congestion there, which absorbs capacity and puts upward pressure on rates.
00:05:26.160 --> 00:05:31.040
So that might be why rates are still quite elevated, even if they're coming down from those highs.
00:05:31.279 --> 00:05:39.759
On the Trans-Pacific, same thing in terms of early start to peak season, and there was an anticipation that we'd start to see an early cooling as well.
00:05:40.079 --> 00:05:48.639
But even though rates on Asia Europe and Trans-Pacific had kind of moved in tandem since late May, in recent weeks, those rates have diverged.
00:05:48.720 --> 00:05:58.560
So starting with the East Coast, East Coast rates hit a high of$9,000 per FEU in June when basically all these lanes had hit their peak season peaks.
00:05:58.639 --> 00:06:00.639
But rates have kind of stayed there since then.
00:06:00.720 --> 00:06:05.120
And just this week, they've started to trend up to about$9,400 per FEU.
00:06:05.360 --> 00:06:11.519
West Coast prices reached a peak in July, have fallen about$1,500 since then.
00:06:11.600 --> 00:06:16.959
It was a high of$7,600, had fallen back to about$6,000 per FEU.
00:06:17.279 --> 00:06:22.160
Um, and that seemed to indicate that demand was easing early start to peak season, early end.
00:06:22.399 --> 00:06:27.759
But rates have now climbed about$1,300 since the start of August, back to$7,400.
00:06:28.079 --> 00:06:30.800
So just$200 short of the earlier peak.
00:06:30.959 --> 00:06:39.279
Now it might be that actually that decrease in rates was a function of an increase in capacity as opposed to easing demand.
00:06:39.360 --> 00:06:49.360
So carriers, because rates were so high, it started injecting capacity, adding extra loaders to the lane to you know capture some of those elevator rates and service the demand there.
00:06:49.519 --> 00:06:51.920
And that might have caused that decrease in demand.
00:06:52.079 --> 00:06:56.319
Now we might be seeing capacity being adjusted a little bit and prices are going back up.
00:06:56.480 --> 00:06:59.360
But either way, it seems that that demand is still there.
00:06:59.519 --> 00:07:05.519
So even if demand peaked in July, it seems that demand is still significant on these lanes.
00:07:05.759 --> 00:07:08.879
Now, this has been surprising to a lot of observers, including including me.
00:07:08.959 --> 00:07:11.600
I've had that the early start would mean an early end.
00:07:11.680 --> 00:07:18.879
Um National Retail Federation had kind of projected that early in the summer that July was going to be the big peak and then a pretty sharp drop August and September.
00:07:19.040 --> 00:07:30.000
Now they've revised that to say that August and September are going to be still quite elevated and more of a sustained July, August, September peak, which is pretty normal, even if we had that early start.
00:07:30.560 --> 00:07:31.680
Why is this the case?
00:07:31.839 --> 00:07:33.680
Why have possibly things changed?
00:07:33.759 --> 00:07:36.399
It's possible a couple reasons.
00:07:36.639 --> 00:07:38.560
One might be the tariff deadline.
00:07:38.639 --> 00:07:42.639
So some of that early start might have been to get ahead of July 24th tariff deadline.
00:07:42.879 --> 00:07:48.480
Um, you know, a lot of shippers might have anticipated that tariffs were going to increase after Section 122 tariffs expired.
00:07:48.560 --> 00:07:59.279
And more or less they were replaced by Section 301 tariffs that were quite similar, both at about 10% for a lot of um uh imports from a lot of countries or 12.5%, which isn't a huge increase.
00:07:59.360 --> 00:08:13.600
So it's possible that because tariffs kind of didn't change that much, that some shippers who had anticipated stopping at this point are deciding, oh, well, we'll we'll continue uh though our orders because we're not seeing those big increases from tariffs.
00:08:13.839 --> 00:08:20.399
The other part might be some caution on the part of some shippers that were ordering but weren't kind of pulling forward earlier in the summer.
00:08:20.720 --> 00:08:39.120
But um, now that they you know kind of see that consumer spending is is holding up, that there continues to be this resilience, then you know, that consumers are continuing to spend, that might have increased their expectations for the big shopping events coming up, and that therefore they are increasing or continuing to order.
00:08:39.279 --> 00:08:44.000
And so those might be why we're seeing demand hold up for longer than a lot of people expected.
00:08:44.159 --> 00:08:48.639
Um, and air cargo, not the so much big changes here.
00:08:48.799 --> 00:09:10.080
We've seen rates increase a little bit in the last couple of weeks, possibly from increases or introductions of adjusted higher fuel emergency fuel surcharges from some carriers because of rising jet fuel prices, which have kind of leveled off but have increased significantly since uh the collapse of the uh US-Iran ceasefire since early July.
00:09:10.159 --> 00:09:14.559
And some of those surcharges are being introduced now, so that might represent some of those increases.
00:09:14.799 --> 00:09:28.559
China's North America, for example, um increased about 6% last week up to about$6 per kilo, and China Europe rates increased 2% to go above$4 per kilo, and that's what we have for this week.
00:09:28.720 --> 00:09:30.720
Thanks for listening and hope to see you next time.
00:00:00.000 --> 00:00:04.879
Hey everybody, welcome to this week's edition of Container Bites from Fritos.
00:00:05.360 --> 00:00:07.440
I am Judah Lean, head of research.
00:00:07.519 --> 00:00:11.279
It's gonna be just me this week as Julia is out on vacation.
00:00:11.439 --> 00:00:13.439
So let's jump right in.
00:00:13.759 --> 00:00:22.079
If we start uh once again with what's going on in the Street of Hormuz, last week it seemed like we were getting pretty close to some sort of agreement.
00:00:22.239 --> 00:00:35.679
Iran and Oman had made announcements that they were getting close to an arrangement that would have Iran control entry into the strait and into the Persian Gulf and Oman control exits.
00:00:35.920 --> 00:00:46.799
It seems like this was kind of imminent, but since then it's basically fallen apart, maybe not from the Oman-Iran side, but because of additional uh demands that Iran is making of the U.S.
00:00:46.960 --> 00:00:49.039
Because basically this would be contingent on the U.S.
00:00:49.119 --> 00:00:51.200
removing their uh blockade.
00:00:51.520 --> 00:00:55.759
Iran has reportedly released a list of demands of the U.S.
00:00:55.920 --> 00:00:59.759
to have the strait open, which included a ban on U.S.
00:00:59.840 --> 00:01:06.480
and Israel-linked vessels, transit fees for vessels from certain countries, as well as reparations from the U.S.
00:01:06.560 --> 00:01:09.040
for damage caused during uh U.S.
00:01:09.120 --> 00:01:10.959
strikes during the course of this war.
00:01:11.200 --> 00:01:17.280
Um, and all that seems to have really pushed hoax back down that the strait is going to open soon.
00:01:17.519 --> 00:01:22.319
We're really kind of back to the wartime status quo, which is very few transits, U.S.
00:01:22.480 --> 00:01:25.840
a blockade, periodic uh attacks on vessels.
00:01:25.920 --> 00:01:34.159
Um, and that's kind of back where we are, although there are statements kind of every day indicating that a deal is imminent, but so far those haven't materialized.
00:01:34.400 --> 00:01:42.879
One interesting development alongside this is that we've seen additional steps from carriers to increase transits through the Red Sea.
00:01:43.120 --> 00:01:54.799
Now we know that the Houthis have been threatening transits through the southern part of the Red Sea, the Baba Mondeb Strait since the beginning of the war, but hadn't really attacked any vessels since then.
00:01:54.959 --> 00:02:06.799
Uh, but just in the last few weeks there has been an escalation, and this is really because of an escalation related to the Iran war, but more directly between Saudi Arabia and the Houthis, which is a conflict that has extended for several years now.
00:02:06.959 --> 00:02:15.439
The Houthis have been, uh have attacked vessels linked to Saudi Arabia and said that they will attack the vessels that are making port calls in Saudi Arabia.
00:02:15.599 --> 00:02:20.639
Um, even so, even though there's kind of an escalation there, where you've seen these additional steps.
00:02:20.800 --> 00:02:33.520
As we've said before, CMACGM has been transiting through um when most other carriers had stayed away from the uh Red Sea and they're continuing to kind of restore or increase some of the sailings through the Red Sea.
00:02:33.599 --> 00:02:39.039
Now we have Hapag Lloyd and the MERS reinstating some of those sailings and also Kraska.
00:02:39.280 --> 00:02:53.439
So we have you know several steps by several carriers back towards the Red Sea, and this may be a beginning of a more general return, although again we've seen these stop and starts before related to what's going on with the with the conflict in Iran.
00:02:53.520 --> 00:03:02.080
So this is another kind of source of uncertainty, but maybe an encouraging step to see carriers willing to start going back, even though there's this you know conflict continues.
00:03:02.319 --> 00:03:04.719
What is all this meant for container rates?
00:03:04.879 --> 00:03:06.719
The answer is really not much.
00:03:06.960 --> 00:03:17.680
The street of Hormuz closure, the big impact is on the price of oil and therefore the price of fuel, and that's probably setting or impacting the floor for where container rates will go.
00:03:17.759 --> 00:03:28.319
But for now, as we've said, really since late May or at least the beginning of June, container rates have been driven by peak season trends, and that's where we still are.
00:03:28.400 --> 00:03:36.000
So, as we've said, there was an early start to peak season this year for various reasons related to straight of hormones and price increases that were coming there.
00:03:36.159 --> 00:03:45.199
And because peak seasons start early and rates increase very, very early already by early June, there is the anticipation that rates might start cooling early as well.
00:03:45.360 --> 00:03:49.120
The peak season might start um easing earlier than usual as well.
00:03:49.199 --> 00:03:51.199
And that seems to be the case for Asia Europe.
00:03:51.759 --> 00:04:01.840
Carriers now are increasing blank sailings for August, they're canceling or reducing uh planned mid-month rate increases in August as well, and spot rates are falling too.
00:04:01.919 --> 00:04:11.520
So prices have eased about$1,000 and about 15% for both Asia to North Europe and the Mediterranean since reaching the peak in early June.
00:04:11.680 --> 00:04:14.960
Last week's averages decreased 8% week on week.
00:04:15.199 --> 00:04:19.759
And now there are about$5,000 to North Europe and$6,000 to Mediterranean.
00:04:19.920 --> 00:04:23.839
Daily rates so far this week are also easing uh slightly, but at about that level.
00:04:24.000 --> 00:04:34.480
So these price levels are back to mid-June levels, but they're still about$2,000 per FEU, higher than they were before peak season demand started in mid-May.
00:04:34.720 --> 00:04:38.879
So the fact that rates aren't kind of cooling more significantly might point to a couple of things.
00:04:39.040 --> 00:04:48.319
One might be that you know demand is still elevated, but not at kind of the peak levels it was earlier in the summer, but also that congestion is really a factor now.
00:04:48.399 --> 00:05:06.959
So there's both congestion in some of the hubs in Europe that are dependent on the Rhine River for uh inland transportation, and that might be causing a backlog of containers at these ports because water levels for the Rhine are extremely low right now due to drought, and that's causing some backlogs there.
00:05:07.120 --> 00:05:26.079
And the other, and this is true uh across lanes, dependent on the Far East, has been just a series of typhoons, three really significant typhoons over the last month or so that have continued to batter some of the major hubs, including Shanghai in the Far East, and those causing serious congestion there, which absorbs capacity and puts upward pressure on rates.
00:05:26.160 --> 00:05:31.040
So that might be why rates are still quite elevated, even if they're coming down from those highs.
00:05:31.279 --> 00:05:39.759
On the Trans-Pacific, same thing in terms of early start to peak season, and there was an anticipation that we'd start to see an early cooling as well.
00:05:40.079 --> 00:05:48.639
But even though rates on Asia Europe and Trans-Pacific had kind of moved in tandem since late May, in recent weeks, those rates have diverged.
00:05:48.720 --> 00:05:58.560
So starting with the East Coast, East Coast rates hit a high of$9,000 per FEU in June when basically all these lanes had hit their peak season peaks.
00:05:58.639 --> 00:06:00.639
But rates have kind of stayed there since then.
00:06:00.720 --> 00:06:05.120
And just this week, they've started to trend up to about$9,400 per FEU.
00:06:05.360 --> 00:06:11.519
West Coast prices reached a peak in July, have fallen about$1,500 since then.
00:06:11.600 --> 00:06:16.959
It was a high of$7,600, had fallen back to about$6,000 per FEU.
00:06:17.279 --> 00:06:22.160
Um, and that seemed to indicate that demand was easing early start to peak season, early end.
00:06:22.399 --> 00:06:27.759
But rates have now climbed about$1,300 since the start of August, back to$7,400.
00:06:28.079 --> 00:06:30.800
So just$200 short of the earlier peak.
00:06:30.959 --> 00:06:39.279
Now it might be that actually that decrease in rates was a function of an increase in capacity as opposed to easing demand.
00:06:39.360 --> 00:06:49.360
So carriers, because rates were so high, it started injecting capacity, adding extra loaders to the lane to you know capture some of those elevator rates and service the demand there.
00:06:49.519 --> 00:06:51.920
And that might have caused that decrease in demand.
00:06:52.079 --> 00:06:56.319
Now we might be seeing capacity being adjusted a little bit and prices are going back up.
00:06:56.480 --> 00:06:59.360
But either way, it seems that that demand is still there.
00:06:59.519 --> 00:07:05.519
So even if demand peaked in July, it seems that demand is still significant on these lanes.
00:07:05.759 --> 00:07:08.879
Now, this has been surprising to a lot of observers, including including me.
00:07:08.959 --> 00:07:11.600
I've had that the early start would mean an early end.
00:07:11.680 --> 00:07:18.879
Um National Retail Federation had kind of projected that early in the summer that July was going to be the big peak and then a pretty sharp drop August and September.
00:07:19.040 --> 00:07:30.000
Now they've revised that to say that August and September are going to be still quite elevated and more of a sustained July, August, September peak, which is pretty normal, even if we had that early start.
00:07:30.560 --> 00:07:31.680
Why is this the case?
00:07:31.839 --> 00:07:33.680
Why have possibly things changed?
00:07:33.759 --> 00:07:36.399
It's possible a couple reasons.
00:07:36.639 --> 00:07:38.560
One might be the tariff deadline.
00:07:38.639 --> 00:07:42.639
So some of that early start might have been to get ahead of July 24th tariff deadline.
00:07:42.879 --> 00:07:48.480
Um, you know, a lot of shippers might have anticipated that tariffs were going to increase after Section 122 tariffs expired.
00:07:48.560 --> 00:07:59.279
And more or less they were replaced by Section 301 tariffs that were quite similar, both at about 10% for a lot of um uh imports from a lot of countries or 12.5%, which isn't a huge increase.
00:07:59.360 --> 00:08:13.600
So it's possible that because tariffs kind of didn't change that much, that some shippers who had anticipated stopping at this point are deciding, oh, well, we'll we'll continue uh though our orders because we're not seeing those big increases from tariffs.
00:08:13.839 --> 00:08:20.399
The other part might be some caution on the part of some shippers that were ordering but weren't kind of pulling forward earlier in the summer.
00:08:20.720 --> 00:08:39.120
But um, now that they you know kind of see that consumer spending is is holding up, that there continues to be this resilience, then you know, that consumers are continuing to spend, that might have increased their expectations for the big shopping events coming up, and that therefore they are increasing or continuing to order.
00:08:39.279 --> 00:08:44.000
And so those might be why we're seeing demand hold up for longer than a lot of people expected.
00:08:44.159 --> 00:08:48.639
Um, and air cargo, not the so much big changes here.
00:08:48.799 --> 00:09:10.080
We've seen rates increase a little bit in the last couple of weeks, possibly from increases or introductions of adjusted higher fuel emergency fuel surcharges from some carriers because of rising jet fuel prices, which have kind of leveled off but have increased significantly since uh the collapse of the uh US-Iran ceasefire since early July.
00:09:10.159 --> 00:09:14.559
And some of those surcharges are being introduced now, so that might represent some of those increases.
00:09:14.799 --> 00:09:28.559
China's North America, for example, um increased about 6% last week up to about$6 per kilo, and China Europe rates increased 2% to go above$4 per kilo, and that's what we have for this week.
00:09:28.720 --> 00:09:30.720
Thanks for listening and hope to see you next time.
