Container Bytes #47: Red Sea Capacity Effects, Panama Adjustments, and Air Disruptions

Speaking of which, things are escalating significantly in the Strait of Hormuz once again.

And for freight, that means fuel costs are climbing again.

So for ocean freight, fuel surcharges may be keeping the floor for rates elevated.

But for now, overall, rate levels are being driven by other factors.

So let's start with the Trans-Pacific.

Do we see this year's peak season coming to an end just yet?

Yeah, so starting with fuel costs, there have been really significant escalations in terms of the attacks back and forth between Iran and the U.S. And when we see these escalations, you see often a direct impact on what crude oil prices are doing, and that usually has an impact on how fuel costs are behaving.

In addition, we have some increase in Chinese demand for crude oil, which for a lot of the year has been a big easing factor in terms of pressure on rates because there's been very little Chinese imports.

They've been relying on reserves and things like that.

So that's starting to push some demand up as well.

In any case, we see bunker fuel prices back to where they were in June.

Jet fuel prices are back to where they were in May.

Both of these are about 60% higher than before the war.

So we're not at the highs that we had kind of early on in the war.

but rates are much higher than they had been really from May and on.

We had started to see prices cooling, and now they're increasing from lows they hit in early July when there's optimism around the ceasefire.

In any case, moving to ocean rates, as you said, you're not really seeing changes in oil prices influencing changes in container prices because there are other forces that are having kind of a larger impact.

But as you said, there probably is a higher floor because of what fuel costs are doing.

So in terms of Trans-Pacific, ocean rates cooled slightly last week.

And that suggests that maybe there won't be any more increases until we get to the end of peak season.

We're lucky in the last few weeks that we have a golden week coming up.

It's possible there'd be some additional demand afterwards.

But because peak season kind of started so early, it's likely that it won't.

But of course, who knows? But as we know, peak season started early.

we've seen rates kind of at peak levels and somewhat increasing at least for the east coast since early july current rates are at 7 600 uh per fu to the west coast and 95 to the east coast so they're about back to levels that we've last seen in during peak season 2024 pcs during 2024 We had seasonal demand, but we also had red seed disruptions, which were absorbing capacity for the first time.