Key insights:
1. US-China trade talks ahead of the Xi-Trump meeting this week are reportedly aimed at maintaining stability in the fragile relationship; the administration is reportedly prepared to offer a three-to-six month extension of the current trade truce set to expire in November and covering both tariff levels and the pause on $1M port call fees on China-linked vessels.
3. Meanwhile, Asia-Europe spot rates continued cooling. Asia - Mediterranean prices are now back to pre-peak season levels while N. Europe rates remain $1,000/FEU higher than in mid-May.
4. The sharper Mediterranean decline may reflect both the sharper increase in Red Sea transits on this lane and N. Europe containers still contending with serious port congestion – with a potential upcoming indefinite port strike in Germany that could add to the operational challenges.
5. In air cargo, China - N. Europe prices fell 18% back to mid-August levels of $4.30/kg last week, as the market continues to see lower volumes as e-commerce demand slows. China - US rates were stable at about $6.50/kg though daily prices so far this week are trending upwards.
Ocean rates - Freightos Baltic Index
Asia-US West Coast prices (FBX01 Weekly) increased 4% to $8,102/FEU.
Asia-US East Coast prices (FBX03 Weekly) decreased 1% to $9,606/FEU.
Asia-N. Europe prices (FBX11 Weekly) decreased 15% to $3,702/FEU.
Asia-Mediterranean prices (FBX13 Weekly) decreased 7% to $3,881/FEU.
Air rates - Freightos Air Index
China - N. America weekly prices decreased 1% to $6.48/kg.
China - N. Europe weekly prices decreased 18% to $4.30/kg.
N. Europe - N. America weekly prices increased 3% to $2.09/kg.
Analysis
Trade talks continue between the US and China as representatives work to prepare the ground for the Xi -Trump meeting this week. The negotiations are reportedly aimed at maintaining stability in the fragile trade relationship, as opposed to pushing major policy shifts in either direction.
Tariffs introduced by the US since the Supreme Court invalidated IEEPA restored duties on China to within 7.5 percentage points of the level agreed upon between the sides last November, with the agreement set to expire this November.
The USTR has reportedly concluded an additional Section 301 investigation, focused on issues of excess manufacturing capacity, and recommending an additional 7.5% tariff on Chinese exports. The White House seemed ready to announce this increase before the September meeting, but the administration is now expected to hold off on the announcement – either to avoid a possible escalation, or to use the findings as leverage in the current negotiations.
The administration is reportedly prepared to offer a three to six month extension of the current trade truce, which includes not only tariff levels – changes to which could impact international logistics – but also the pause of $1M US port call fees on China-linked vessels. The fees went into effect in mid-October of last year. China quickly imposed similar fees on US vessels until the sides announced a one-year pause on November 10th.
Despite the early start to east-west ocean peak season back in May which pushed container rates up sharply into early July, transpacific rates remain at about peak levels while Asia - Europe prices continue to cool.
Resilient transpacific demand – possibly helped by the lack of a tariff hike in late July, and now including a last push to get containers moved before the Golden Week holiday – alongside persistent, weather-driven, Far East port congestion and blanked sailings, are keeping container rates at year highs.
Far East - West Coast prices increased 4% to more than $8,100/FEU last week, with East Coast rates about level at $9,600/FEU. Some of the blanked sailings are likely due to delays and schedule disruptions caused by the congestion, while carriers are also using the capacity reductions to adjust to the expected lower volumes over the holiday-period, and the likely easing demand later in October as peak season comes to an end. But analysis that nonetheless shows a lower rate of cancellations compared to recent years may reflect the relative demand strength also at play.
Some indices see these transpacific rate levels as approaching pandemic-era highs. But Freightos Baltic Index data show that at the peak of the unprecedented COVID-driven demand surge and the resulting extreme port congestion in September of 2021, transpacific West Coast rates reached an all-time high of more than $20,000/FEU. At the time, carriers were not moving spot shipments booked at base rates, meaning that the actual market price to move a container needed to include premium surcharges – normally optional, but during this span required – which pushed the FBX benchmark to those historic highs.
So, while current market conditions are putting significant pressure on rates – and pushing them back to levels last seen during peak season 2024 when Red Sea capacity constraints were a major factor – FBX data suggest we aren't nearing pandemic levels just yet.
Asia - Europe container rates continued their gradual decline from peak season highs as volumes cool. Asia - N. Europe prices fell 15% last week to $3,700/FEU, down from a July peak of almost $6K/FEU but still about $1,000/FEU higher than before peak season began in late May. Asia - Mediterranean rates however – which decreased 7% to $3,900/FEU last week, down from more than $7K/FEU in July – have eased all the way back to May levels.
The sharper decline for prices to the Mediterranean may be due both to the sharper increase in effective capacity via more Red Sea transits for vessels servicing this lane compared to those to or from N. Europe, and to congestion at N. Europe hubs – including from low water levels in the Rhine River – constraining capacity on Asia - N. Europe trades. The Verdi labor union in Germany is voting on a possible indefinite port strike as early as October, which would worsen congestion challenges in the region.
In air cargo, China - N. Europe prices fell 18% back to mid-August levels of $4.30/kg last week, as the market continues to see lower volumes as e-commerce demand slows. China - US rates were stable at about $6.50/kg though daily prices so far this week are trending upwards.
