In Freightos’ latest monthly ocean freight market update, Judah Levine, Head of Research at the digital marketplace and booking platform, began by highlighting rising tensions in the Strait of Hormuz as Iranian attacks on ships pick up again.
At the time of the webinar, however, Freightos said Gulf-bound container traffic had seen no additional operational impact, with container services continuing to use alternative routings.
The Houthi–Saudi Arabia conflict has also escalated sharply in recent days, with the Yemeni militia launching missile attacks on Riyadh Airport and other locations in the Kingdom. The Saudis have retaliated by targeting Houthi fuel sites.
Carriers had avoided the Red Sea from the start of the Iran war amid a potential threat to vessels from the Iran-backed Houthis. However, since July, they have steadily returned, especially on Asia–Mediterranean routes.
The key question now is whether the escalation of hostilities along the Red Sea will lead to the Houthis extending their attacks to non-Saudi shipping, forcing ocean carriers into a rethink on routings, Levine noted.
Port Congestion
Another major issue flagged during the webinar was the container market’s ongoing struggle with port congestion.
In the Far East, a series of typhoons in July and August created backlogs at some of the major container hubs in China, including Shanghai, Ningbo and Yantian.
“Things are better than they were a month ago, or certainly a little bit further back. Volumes are easing, and we’re kind of past the peak of peak season on some lanes coming out of Asia.
“But there are still reports of high levels of yard utilization at some of these ports, with two- to three-day waits for arriving vessels. Things are trending in the right direction, but it could still be a factor, with some lingering backups and backlogs in the coming weeks as these ports try and recover and try and dig out [of the congestion].”
In addition to the Far East, there have been delays of more than a day for arriving vessels at some ports in Northern Europe, such as Rotterdam, Antwerp, Bremerhaven and Felixstowe.
“Some of this is just kind of persistent congestion that has been a problem, really, for more than a year. And then, of course, there are also low water levels on the Rhine, which impact some of these ports.”
According to data from Sea-Intelligence, port congestion has tied up 8.5% of global container fleet capacity and could take months to clear.
Congestion, plus high fuel costs, could set an elevated floor for rates, even during low-demand stretches, and a higher baseline when demand returns ahead of Lunar New Year, Levine noted.
Panama Canal
He also drew attention to an improving picture regarding navigation through the Panama Canal, particularly for transpacific shippers going to the US East Coast.
The Panama Canal Authority has restored the daily number of Neopanamax transits to the normal 10 from nine, effective October 15. It also increased the maximum authorized draft to 49 feet in late September.
“So, we have improved conditions now. Does this mean that we’re kind of out of the woods? Probably not. There’s a developing El Niño, and that could have an impact on the remainder of the rainy season, which is meant to go until January, and possibly beyond.”
Volumes
For US imports, peak season started early and stayed strong through August. A dip is expected in October and a much sharper drop in November and December. Delays caused by typhoons stretched arrivals.
Volumes are historically very strong but flat year over year, which can probably be linked to US-China trade-war uncertainty.
Asia–Europe volumes peaked around July and are now easing. Growth likely reflects trade diversion resulting from the trade war.
The EU is discussing mechanisms to curb Chinese imports, so next year’s growth may be slower, which matters for shippers’ contracts with carriers.
Freight Rates and GRIs
Asia–Europe rates peaked in July and have fallen steadily since. Rates to the Mediterranean have declined faster in percentage and dollar-value terms compared with those to Northern Europe.
As to where they go from here, Levine pointed to announcements by some carriers that they will be pushing through general rate increases (GRIs), likely supported by blank sailings, in October.
“But rates are already 70% higher than they were last year, so we’ll see what happens. This year, there’s a lot of uncertainty from the shipper perspective. We’re seeing reports that some of them are asking to extend their existing contracts because they think that rates are kind of elevated compared to where they will be next year.
“They’re not ready to negotiate under the current spot rates as a baseline for several reasons. One, as mentioned, is that there’s been very fast growth in Asia–Europe volumes, and perhaps this coming year will not be as robust or will be kind of at similar levels but not higher.”
Secondly, the global fleet is continuing to grow, and the largest vessels are being introduced on these lanes, Levine explained.
“Also, if Red Sea traffic continues uninterrupted, more effective capacity is going to be freed up. In addition, it’s possible that at some point fuel costs will come down. So, there are several reasons why this is a challenging negotiating season for shippers on these lanes.”
Turning to the transpacific, Levine said it was a different story.
“We saw an increase [in rates] in that early start to peak season, and they have really just kind of stayed elevated at those peak levels since then, supported primarily by strong demand, and also the congestion from those typhoons has played a part.”
Now, following China’s Golden Week, there are also capacity reductions through blank sailings. Demand is projected to ease, so rates will probably start to ease too, he observed.
“But even with that demand-side easing, we still have this port congestion and also looming [US import] tariff increases, which might mean that volumes will be a little bit stronger than they otherwise would have been.
“They may not get back down to pre-peak levels—such as on the Asia–Mediterranean lane—before we start to see demand pick up again in the run-up to [China’s] Lunar New Year. It’s not that far off. We’re in mid-October, and it could start by mid- to late December.”
