WEBVTT
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Hello and welcome to today's episode of Container Bites, your 10 minute update on the latest in freight.
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I'm Julia Frowein, back from vacation, and joined by Judah Levine, our freight expert.
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Judah, thank you for holding down the floor while I was away.
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How are you doing?
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My pleasure.
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I'm doing good and welcome back.
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Thank you.
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Thank you.
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All right, let's dive straight in.
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So we'll start once again in the Middle East.
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The stalemate between the US and Iran remains, and the Strait of Harmuz is still closed.
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In the latest development, the US is launching tighter economic sanctions against countries that trade with Iran.
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Does this have any freight implications?
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Um, good question.
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I would say probably not directly.
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As we've said, in terms of freight, the big implications are operational for containers trying to get in and out of the Gulf states, which is not a huge chunk of the overall container market.
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Um, and then more broadly, it's about the price of oil, and that depends on you know oil flows through the strait, which have been kind of status quo for a while.
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And I don't know that this um these uh sanctions will change that.
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The big question, though, is what this will do in terms of China-U.S.
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relations, because China is the biggest purchase purchaser uh of oil out of Iran.
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Um they're purchasing much less than they were before the war.
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Um, but the question is how far the U.S.
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will go in terms of enforcing this or or enforcing it specifically on China, and that would have implications for freight because we have a relatively fragile China-U.S.
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trade relationship right now.
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If the U.S.
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were to uh apply sanctions, uh in the past China has retaliated kind of tit for tat.
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So um that could have implications for for uh freight.
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Um the other thing to keep in mind in that context is that in November we have the uh U.S.
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port call fees that were scheduled for last November and were kind of averted at the last minute.
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Port call fees on um vessels manufactured or operated by Chinese carriers um are meant to go into effect.
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So that's kind of looming, and it was you know delayed or extended by a year last year, and so that's coming up as well.
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Okay.
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There have been multiple attacks by the Houthis on passing vessels in the Red Sea in the last few weeks.
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In the past, these attacks have set back container carrier steps to resume Red Sea crossings, but now that doesn't seem to be the case.
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Why do you think that is, and what's the latest going on there?
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Yeah, so just this past week, MSC has joined the list of carriers who are sending some vessels or parts of services on a regular basis back through the southern part of the Red Sea.
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This list now includes CMACGM, MERSC, Hapagloid, and also Costco.
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You know, in general, as you said, in the past, when there have been attacks, that's kind of been a setback for steps that these carriers were taking back towards um the Red Sea.
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And we've seen this basically twice when the you know there were steps back earlier in the early part of this year, and then when the war with Iran broke out, um some of those carriers reversed those those uh initiatives.
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Um we saw some you know examples of throughout the the Iran war.
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Now, though, we've seen attacks in in recent weeks.
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Really, these are the first attacks since last October.
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These were um strikes on uh Saudi vessels or vessels linked to Saudi Arabia or making Saudi Arabian port calls, but so far we're seeing them undeterred.
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And you know, I think part of the argument is that the Houthis are saying they're only targeting those types of vessels.
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But in the past, the threat wasn't to all vessels, it was to certain vessels, those linked with Israel, those linked uh with the US, but they're you know, just that just increases the risk and kind of was relying on the Houthis to determine accurately which vessels are linked to to whom and how.
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So that had been a deterrent.
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Now we're not seeing it.
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And the possibility is that there are a couple of things that are changing the calculus related to the Iran war.
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So kind of uh ironic that impacts from a war are pushing some of these carries back to the uh Red Sea, when in the past it was the war and the threat of violence that um that deterred them.
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But those are one, the cost of um uh oil, right?
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The cost of oil has increased, the cost of bunker fuel has increased, so it's made it much more expensive for carriers to divert away from the Red Sea and do the much longer journey uh around the Cape of Good Hope, and that's linked to the Iran War.
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The other one is not linked to the war, um, but we're seeing much worse congestion lately.
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So there's very bad congestion in the Far East uh because of a series of typhoons that have disrupted the operations there.
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And there's also really bad congestion in some of the North European hubs, and this has been kind of worsened because we're in peak season, but it's just kind of been increasingly chronic.
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And when you have this congestion that ties up vessels, carriers are looking for ways to kind of speed up the flow of containers, and this is one way is by kind of going back to the shorter route.
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Okay, thanks.
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So uh shifting to the trade war now for a minute.
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The US-Canada talks aimed at avoiding President Trump's threat of 50% tariffs have collapsed.
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And now we've seen Canada's retaliating as well.
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What does this mean for cross-border trade there?
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Right.
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So the there seemed to be uh the two sides coming very close to uh reaching an agreement over the weekend.
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Um there were even announcements that agreement was signed, and this was all because President Trump had threatened 50% tariffs on about$20 billion worth of uh Canadian exports to the U.S.
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with a deadline over the weekend.
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And then really at the last minute it fell apart.
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Each side is blaming the other for various reasons or various last-minute uh you know requirements or or whatever.
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Nonetheless, this is where we're we're at.
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So now the U.S.
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has introduced 50% tariffs on these goods.
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It only represents about 5% of cross-border trade.
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And Canada now has retaliated, same thing in proportion,$20 billion worth of goods, also about 5% of cross-border trade.
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So it's not a huge swath of overall trade, but it is significant.
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It is going to negatively impact those businesses for these specific types of goods.
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It's going to complicate, you know, cross-border moves mostly by truck.
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There are fewer implications more broadly for, let's say, ocean freight.
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Okay, that's good to hear.
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Um, trade war developments may also be extending the Trans-Pacific Ocean peak season slightly longer than expected.
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What are container rates doing lately?
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Right.
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So, in terms of the uh a trade war and kind of broader tariffs, so as we know, in late July, these Section 122 tariffs that were set globally at 10% expired.
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They were immediately replaced by Section 301 tariffs on 60 of the U.S.
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trading partners, so covering a lot of U.S.
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trade, but also at about 10%, at 12.5%.
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And these were focused on forced labor goods that are manufactured with forced labor controls on those by by other countries.
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Um, but that's left tariffs at about where they were before, and that might be extending the peak season.
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So a lot of shippers might have been pulling forward peak season goods ahead of that deadline in anticipation that that tariffs are going to increase afterwards, and now that they've stayed the same, we might see that we might be seeing more even front loading or just more orders than otherwise would have been were planned.
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And that's because it said tariffs remain the same.
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Now there are other tariff investigations uh underway.
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So there's a Section 301 uh investigation into uh excess uh manufacturing capacity by about 16 of the largest U.S.
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trading partners.
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Um, but that's not you know on the radar exactly.
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There have been statements that the USTR, U.S.
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trade representative, is wrapping up its investigation.
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But even once the investigation is wrapped up, if we look at the uh the forced labor example, it was still two months until tariffs are actually put into place because there's a comments period, there are public hearings, and then there are kind of final recommendations.
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So there's still a window, so we might be seeing more front loading now.
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In terms of uh container rates, Asia to US West Coast, prices last week were level at about$7,500 per FEU.
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Rates ticked up a little bit uh this week, and they're about back to$7,600 per FEU.
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And that's the peak level that rates on this lane hit back in July.
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They decreased a little bit by about$1,000 per container in late July, but they've kind of recovered in August.
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And that's$5,000 higher than they were before peak season demand kicked in uh back in late May May.
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For the East Coast, likewise, rates increased about$5,000 from late May into early July, and they've stayed at about$9,000 per FEU most of the time since then to start August.
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So they've increased by another$800 for FEU.
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So we're seeing kind of uh resilient demand pushing rates up here.
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But also there are some other uh factors as well, capacity reductions, at least for the West Coast, that kind of pushed rates back up.
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Um, and we're also seeing kind of supply-side constraints from that Far East congestion that we mentioned before.
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Um, so that's another factor.
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And looking forward a little bit, the Panama Canal Authority is amounting some um uh reductions or some restrictions on the number of uh of transits per day as well as draft levels.
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They've actually postponed uh another um uh reduction of the maximum draft level um uh from September till October.
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So that's kind of uh good news.
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But carriers are announcing pretty significant uh ranging from like$200 to$1,000 per FEU uh surcharges starting in September, so that might put uh upward pressure on rates starting in uh September.
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And again, this is because they are expecting drought from uh uh coming El Nino.
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Okay, and okay, finally, there have been reports of low water levels elsewhere as well.
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What impacts is this having?
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Right, so we're seeing um low water levels in the Amazon River as well, and that's driving disruptions and pushing higher costs for impacted lanes in and out of some ports of Brazil.
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And there are also drought conditions in the Rhine River, and that's contributing to some of that congestion we mentioned earlier in North European uh container hubs.
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So, together with that congestion in the Far East, it might be helping to keep Asia-Europe container rates kind of higher than it otherwise would be.
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So we said earlier that we had an early start to peak season back in in late May instead of more normally late June or into July.
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Um, and on the Trans-Pacific, we said that rates have continued to stay high, that peak season demand has kind of held up longer than might have been expected because the early start for Asia Europe, we saw an early start to peak season, and it seems we're seeing an early uh end to peak season as well.
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So we had prices that surged about$3,000 to$3,500 per FEU from late May into early July.
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But Matt pushed rates up to about$7,000 to the Mediterranean and$58 to North Europe.
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But we've seen rates gradually ease since then.
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Last week, Mediterranean prices fell 15% back to about$5,000 per FEU, and North Europe rates ease 6% to about$4,700 for per FEU.
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Um, but those are still about 15% and 60% higher than they were before peak season, respectively.
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So Mediterranean rates are kind of kind of getting back to before peak season, but North Europe state rates still remain higher.
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It might be a function of can of that congestion that is keeping them higher than they otherwise would be, even though it seems that from a demand side we're seeing a cooling and a come down from peak season already.
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All right.
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Okay.
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Gosh, it's been a busy weekend freight.
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Thank you.
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Isn't it always we really appreciate it?
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It is all yes, true.
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If you enjoyed the session, please hit the subscribe button to get notified about all our future episodes.
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Thank you for listening and have a great day, everybody.
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Hello and welcome to today's episode of Container Bites, your 10 minute update on the latest in freight.
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I'm Julia Frowein, back from vacation, and joined by Judah Levine, our freight expert.
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Judah, thank you for holding down the floor while I was away.
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How are you doing?
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My pleasure.
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I'm doing good and welcome back.
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Thank you.
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Thank you.
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All right, let's dive straight in.
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So we'll start once again in the Middle East.
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The stalemate between the US and Iran remains, and the Strait of Harmuz is still closed.
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In the latest development, the US is launching tighter economic sanctions against countries that trade with Iran.
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Does this have any freight implications?
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Um, good question.
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I would say probably not directly.
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As we've said, in terms of freight, the big implications are operational for containers trying to get in and out of the Gulf states, which is not a huge chunk of the overall container market.
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Um, and then more broadly, it's about the price of oil, and that depends on you know oil flows through the strait, which have been kind of status quo for a while.
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And I don't know that this um these uh sanctions will change that.
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The big question, though, is what this will do in terms of China-U.S.
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relations, because China is the biggest purchase purchaser uh of oil out of Iran.
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Um they're purchasing much less than they were before the war.
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Um, but the question is how far the U.S.
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will go in terms of enforcing this or or enforcing it specifically on China, and that would have implications for freight because we have a relatively fragile China-U.S.
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trade relationship right now.
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If the U.S.
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were to uh apply sanctions, uh in the past China has retaliated kind of tit for tat.
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So um that could have implications for for uh freight.
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Um the other thing to keep in mind in that context is that in November we have the uh U.S.
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port call fees that were scheduled for last November and were kind of averted at the last minute.
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Port call fees on um vessels manufactured or operated by Chinese carriers um are meant to go into effect.
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So that's kind of looming, and it was you know delayed or extended by a year last year, and so that's coming up as well.
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Okay.
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There have been multiple attacks by the Houthis on passing vessels in the Red Sea in the last few weeks.
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In the past, these attacks have set back container carrier steps to resume Red Sea crossings, but now that doesn't seem to be the case.
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Why do you think that is, and what's the latest going on there?
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Yeah, so just this past week, MSC has joined the list of carriers who are sending some vessels or parts of services on a regular basis back through the southern part of the Red Sea.
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This list now includes CMACGM, MERSC, Hapagloid, and also Costco.
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You know, in general, as you said, in the past, when there have been attacks, that's kind of been a setback for steps that these carriers were taking back towards um the Red Sea.
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And we've seen this basically twice when the you know there were steps back earlier in the early part of this year, and then when the war with Iran broke out, um some of those carriers reversed those those uh initiatives.
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Um we saw some you know examples of throughout the the Iran war.
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Now, though, we've seen attacks in in recent weeks.
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Really, these are the first attacks since last October.
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These were um strikes on uh Saudi vessels or vessels linked to Saudi Arabia or making Saudi Arabian port calls, but so far we're seeing them undeterred.
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And you know, I think part of the argument is that the Houthis are saying they're only targeting those types of vessels.
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But in the past, the threat wasn't to all vessels, it was to certain vessels, those linked with Israel, those linked uh with the US, but they're you know, just that just increases the risk and kind of was relying on the Houthis to determine accurately which vessels are linked to to whom and how.
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So that had been a deterrent.
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Now we're not seeing it.
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And the possibility is that there are a couple of things that are changing the calculus related to the Iran war.
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So kind of uh ironic that impacts from a war are pushing some of these carries back to the uh Red Sea, when in the past it was the war and the threat of violence that um that deterred them.
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But those are one, the cost of um uh oil, right?
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The cost of oil has increased, the cost of bunker fuel has increased, so it's made it much more expensive for carriers to divert away from the Red Sea and do the much longer journey uh around the Cape of Good Hope, and that's linked to the Iran War.
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The other one is not linked to the war, um, but we're seeing much worse congestion lately.
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So there's very bad congestion in the Far East uh because of a series of typhoons that have disrupted the operations there.
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And there's also really bad congestion in some of the North European hubs, and this has been kind of worsened because we're in peak season, but it's just kind of been increasingly chronic.
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And when you have this congestion that ties up vessels, carriers are looking for ways to kind of speed up the flow of containers, and this is one way is by kind of going back to the shorter route.
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Okay, thanks.
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So uh shifting to the trade war now for a minute.
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The US-Canada talks aimed at avoiding President Trump's threat of 50% tariffs have collapsed.
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And now we've seen Canada's retaliating as well.
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What does this mean for cross-border trade there?
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Right.
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So the there seemed to be uh the two sides coming very close to uh reaching an agreement over the weekend.
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Um there were even announcements that agreement was signed, and this was all because President Trump had threatened 50% tariffs on about$20 billion worth of uh Canadian exports to the U.S.
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with a deadline over the weekend.
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And then really at the last minute it fell apart.
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Each side is blaming the other for various reasons or various last-minute uh you know requirements or or whatever.
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Nonetheless, this is where we're we're at.
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So now the U.S.
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has introduced 50% tariffs on these goods.
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It only represents about 5% of cross-border trade.
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And Canada now has retaliated, same thing in proportion,$20 billion worth of goods, also about 5% of cross-border trade.
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So it's not a huge swath of overall trade, but it is significant.
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It is going to negatively impact those businesses for these specific types of goods.
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It's going to complicate, you know, cross-border moves mostly by truck.
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There are fewer implications more broadly for, let's say, ocean freight.
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Okay, that's good to hear.
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Um, trade war developments may also be extending the Trans-Pacific Ocean peak season slightly longer than expected.
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What are container rates doing lately?
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Right.
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So, in terms of the uh a trade war and kind of broader tariffs, so as we know, in late July, these Section 122 tariffs that were set globally at 10% expired.
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They were immediately replaced by Section 301 tariffs on 60 of the U.S.
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trading partners, so covering a lot of U.S.
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trade, but also at about 10%, at 12.5%.
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And these were focused on forced labor goods that are manufactured with forced labor controls on those by by other countries.
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Um, but that's left tariffs at about where they were before, and that might be extending the peak season.
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So a lot of shippers might have been pulling forward peak season goods ahead of that deadline in anticipation that that tariffs are going to increase afterwards, and now that they've stayed the same, we might see that we might be seeing more even front loading or just more orders than otherwise would have been were planned.
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And that's because it said tariffs remain the same.
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Now there are other tariff investigations uh underway.
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So there's a Section 301 uh investigation into uh excess uh manufacturing capacity by about 16 of the largest U.S.
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trading partners.
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Um, but that's not you know on the radar exactly.
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There have been statements that the USTR, U.S.
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trade representative, is wrapping up its investigation.
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But even once the investigation is wrapped up, if we look at the uh the forced labor example, it was still two months until tariffs are actually put into place because there's a comments period, there are public hearings, and then there are kind of final recommendations.
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So there's still a window, so we might be seeing more front loading now.
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In terms of uh container rates, Asia to US West Coast, prices last week were level at about$7,500 per FEU.
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Rates ticked up a little bit uh this week, and they're about back to$7,600 per FEU.
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And that's the peak level that rates on this lane hit back in July.
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They decreased a little bit by about$1,000 per container in late July, but they've kind of recovered in August.
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And that's$5,000 higher than they were before peak season demand kicked in uh back in late May May.
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For the East Coast, likewise, rates increased about$5,000 from late May into early July, and they've stayed at about$9,000 per FEU most of the time since then to start August.
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So they've increased by another$800 for FEU.
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So we're seeing kind of uh resilient demand pushing rates up here.
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But also there are some other uh factors as well, capacity reductions, at least for the West Coast, that kind of pushed rates back up.
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Um, and we're also seeing kind of supply-side constraints from that Far East congestion that we mentioned before.
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Um, so that's another factor.
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And looking forward a little bit, the Panama Canal Authority is amounting some um uh reductions or some restrictions on the number of uh of transits per day as well as draft levels.
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They've actually postponed uh another um uh reduction of the maximum draft level um uh from September till October.
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So that's kind of uh good news.
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But carriers are announcing pretty significant uh ranging from like$200 to$1,000 per FEU uh surcharges starting in September, so that might put uh upward pressure on rates starting in uh September.
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And again, this is because they are expecting drought from uh uh coming El Nino.
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Okay, and okay, finally, there have been reports of low water levels elsewhere as well.
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What impacts is this having?
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Right, so we're seeing um low water levels in the Amazon River as well, and that's driving disruptions and pushing higher costs for impacted lanes in and out of some ports of Brazil.
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And there are also drought conditions in the Rhine River, and that's contributing to some of that congestion we mentioned earlier in North European uh container hubs.
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So, together with that congestion in the Far East, it might be helping to keep Asia-Europe container rates kind of higher than it otherwise would be.
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So we said earlier that we had an early start to peak season back in in late May instead of more normally late June or into July.
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Um, and on the Trans-Pacific, we said that rates have continued to stay high, that peak season demand has kind of held up longer than might have been expected because the early start for Asia Europe, we saw an early start to peak season, and it seems we're seeing an early uh end to peak season as well.
00:10:15.840 --> 00:10:22.320
So we had prices that surged about$3,000 to$3,500 per FEU from late May into early July.
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But Matt pushed rates up to about$7,000 to the Mediterranean and$58 to North Europe.
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But we've seen rates gradually ease since then.
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Last week, Mediterranean prices fell 15% back to about$5,000 per FEU, and North Europe rates ease 6% to about$4,700 for per FEU.
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Um, but those are still about 15% and 60% higher than they were before peak season, respectively.
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So Mediterranean rates are kind of kind of getting back to before peak season, but North Europe state rates still remain higher.
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It might be a function of can of that congestion that is keeping them higher than they otherwise would be, even though it seems that from a demand side we're seeing a cooling and a come down from peak season already.
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All right.
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Okay.
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Gosh, it's been a busy weekend freight.
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Thank you.
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Isn't it always we really appreciate it?
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It is all yes, true.
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