Key insights:
1. The US has announced tighter economic sanctions on countries trading with Iran, with risk that these could extend to China and complicate fragile China-US relations.
3. Canada-US trade talks collapsed over the weekend, with 50% tariffs on about 5% of Canadian exports now in effect and Canada planning retaliatory measures for September 8th, with signs Canada may be bracing for a prolonged standoff.
4. Transpacific container rates are still at peak levels, with West Coast prices at about $7,500/FEU and East Coast climbing another $800/FEU this month to nearly $9,800/FEU. Sustained demand – possibly due to the lack of a late July tariff hike – together with carrier capacity cuts and Far East port congestion are supporting these rate levels, with Panama Canal surcharges planned for September set to add upward pressure on East Coast rates.
5. Asia-Europe rates are easing from their early peak season surge as demand cools, but prices remain elevated: Mediterranean rates fell 15% last week to about $5,000/FEU and N. Europe eased 6% to $4,700/FEU, though both are still well above pre-peak levels; Rhine drought conditions contributing to port congestion and Far East port backlogs may be helping to slow the descent.
6. Air cargo is entering a late summer lull, with Far East-US rates down 8% to $6.45/kg last week and daily rates approaching $6.00/kg after briefly exceeding $7.00/kg following Typhoon Dolphin disruptions; Far East-Europe prices ticked up 3% to $4.58/kg despite slumping e-commerce volumes following the EU de minimis cancellation, suggesting carriers are effectively redeploying capacity away from that lane.
Ocean rates - Freightos Baltic Index
Asia-US West Coast prices (FBX01 Weekly) increased 1% to $6,826/FEU.
Asia-US East Coast prices (FBX03 Weekly) increased 2% to $9,576/FEU.
Asia-N. Europe prices (FBX11 Weekly) decreased 6% to $4,699/FEU.
Asia-Mediterranean prices (FBX13 Weekly) decreased 15% to $4,976/FEU.
Air rates - Freightos Air Index
China - N. America weekly prices decreased 8% to $6.46/kg.
China - N. Europe weekly prices increased 3% to $4.58/kg.
N. Europe - N. America weekly prices increased 2% to $2.00/kg.
Analysis
The US has announced an ambitious tightening of economic sanctions on countries trading with Iran in the latest step to break the stalemate and re-open the Strait of Hormuz. Steps that extend to penalties against China – the largest customer for Iranian oil – could have implications for already fragile US-China trade relations.
Tensions likewise remain high in the Red Sea following recent Houthi attacks on passing vessels. Nonetheless, MSC has now joined the list of major carriers sending ships through the southern Red Sea. These steps are sparking some optimism that we are seeing the start of a gradual return to normal levels of container traffic through the waterway.
Canada - US trade talks aimed at averting President Trump’s threat of 50% tariffs on $20B, or about 5%, of Canadian exports to the US collapsed at the last minute over the weekend. Those tariffs are now in effect, with Canada planning retaliatory tariffs for September 8th as well as support for negatively impacted Canadian businesses, implying that Canada may be preparing for a prolonged standoff.
In terms of US tariffs on other trading partners, Section 301 10% - 12.5% tariffs targeting forced labor controls have been in effect since the 10% Section 122 tariffs expired in late July. The USTR has still not released its findings for the Section 301 investigations into excess capacity practices by sixteen of the US’s largest trading partners, which could be used to restore tariffs to IEEPA levels. It took two months from the time the findings of the forced labor investigations were released until those tariffs were put in place, with a comments period and public hearings in the interim.
The concern that the White House would substantially increase tariff levels to close July may have been one factor driving the early start to peak season demand and spiking container rates back in June. That tariffs remained about level, and that the window until possibly higher tariffs remains open, may help explain the current, surprising, sustained container demand and peak rate levels on the transpacific.
Asia - US West Coast prices were level last week at about $7,500/FEU, with rates ticking up so far this week, back to the peak of $7,600/FEU reached in early July and nearly $5k/FEU higher than just before peak season demand kicked in back in late May. Prices to the East Coast, which likewise climbed $5k/FEU from late May to early July, had been steady at about the $9,000/FEU level, but have gradually climbed another $800/FEU so far this month.
In addition to resilient demand, transpacific rate behavior is also supported by some carrier capacity reductions, as well as constraints from significant congestion at several major hubs in China. The Panama Canal Authority, which recently announced cuts to daily transit slots due to anticipated drought conditions, will postpone a planned draft reduction from September to October. Several carriers have canal surcharges set for September, which could put upward pressure on rates for some Asia - US East Coast services.
Low Amazon River water levels are likewise driving disruptions and higher costs for impacted lanes in and out of Brazil. And drought conditions in the Rhine that are contributing to persistent congestion at N. Europe container hubs, together with backed up ports in the Far East, may be helping to keep Asia-Europe container rates quite elevated despite post-peak demand levels.
Prices that surged $3,000 - $3,5000/FEU from late May to early July on an early peak season start pushed rates up to more than $7,000/FEU to the Mediterranean and $5,800/FEU to N. Europe. Rates have gradually eased since then. Mediterranean prices fell 15% last week to about $5,000/FEU and N. Europe rates eased 6% to $4,700/FEU to $5k on cooling demand, but still remain 15% and 60% higher than before peak season, respectively.
Air volumes are easing as the industry enters a late summer lull. Freightos Air index data show Far East - US rates decreased 8% to $6.45/kg last week, with daily rates closer to the $6.00/kg mark and approaching July levels after climbing above $7.00/kg earlier in the month after Typhoon Dolphin disrupted operations.
Far East - Europe prices ticked up 3% to $4.58/kg, about level with late June rates despite reports of slumping e-commerce volumes following the EU de minimis cancellation July 1st. This relative rate stability suggests carriers are succeeding in effectively shifting capacity to other lanes as volumes recalibrate.
