Why the Hormuz Toll Doesn't Survive the Math

Let's start off today talking about the read on NYFI, Asia to U.S. West Coast.

So what's going on here?

A- after we, we talked about it a week ago, it seemed that the Pacific rate increases were flattening out.

But things changed again, and rates simply continued upwards, basically soaring.

And we went up roughly $500 per 40 foot to the West Coast, and as much as $600 to the East Coast.

Showing West Coast here, East Coast follows.

Basically exactly the same pattern, just slightly, uh, higher level.

What do we...

What I take away from this, and that's also why we're showing it here with the spread.

I think we've talked about the spread before.

What the spread, the graph here is showing, you see the darker shaded area, the lower part of that's the customers that pay at the 25% level versus where we are for the full, between the highest and lowest, up to 75.

And the lighter shaded area is between the 10 and 90.

So there are people that are paying at the lower end of the white shaded band, and also people that pay at the higher end.

Doesn't necessarily mean that some are being overcharged more than others.

It can be slight differences in what's the relations with the carriers, what's the volume you're shipping with.

There can be many reasons for the rate differential.

But what I find interesting here is if we look at the 10%/90% spread, a month ago that was about $1,000, give or take.

So $1,000 difference between the lower and the higher paying marks.

Fast-forward to last week, the spread has now escalated to $2,400.

That is a very wide spread.

You can see in the rest of the graph here, the spread alone is actually more than what the freight rate was prior to the market going berserk here in, during summer.

So we are now literally at a point where somebody is paying the full freight rate more than somebody else, if we say the full freight rate is what we paid before the market went up.

And we touched upon it before, the wider this spread gets, the more it is a sign of a very unsettled market, where neither shippers nor carriers are actually quite certain about what direction are we going in here? What is going to happen? So uncertainty on the Pacific ramping up potentially even faster than the freight rates themselves in what we're seeing right now.

So that's in the Pacific.

A relevant question would then be, okay, if the Pacific is that uncertain, do we see the same pattern in the other major east-west trade over on Asia to Europe? And if we switch to Asian or Europe, we don't quite find the same.