International Freight Update

Weekly, Freightos offers insights and analysis of the international shipping market.

The following is their analysis.

Key insights:

The US paused its Operation Freedom, designed to support vessel transits out of the Strait of Hormuz  – and which sparked renewed US-Iran exchanges of fire as well as Iranian missile attacks on Gulf states last week – less than two days after its launch. 

Even amid sporadic military engagement, US-Iran negotiations continue, though the sides remain far apart, with President Trump stating that he may start the operation if negotiations stall. In the meantime, Iran announced the creation of a Persian Gulf Strait Authority through which vessels are required to request permission – and possibly pay – to pass through the strait. 

Maersk CEO Vincent Clerc estimates that elevated fuel prices due to the closure has the carrier facing $500M per month in additional costs. He also reports that Maersk has so far been able to pass those costs on to customers via higher freight rates. 

Ocean rate impacts remain mixed however: transpacific rates are about $1,000/FEU above pre-war levels, with reports of capacity getting tight on new blankings, while Asia-Europe has mostly slipped back to February levels; Asia-N. Europe rose 10% last week to $2,850/FEU but is already easing again as carriers prepare mid-month GRIs via an increase in blanked sailings.

Carriers are planning additional, likely modest, increases for mid-month. In preparation, they are stepping up blanked sailings – with reports of east-west service space getting tight and some containers being rolled –  to support higher spot rates during what is still a low demand stretch, and hoping peak season demand picks up to support prices later in the year. 

The latest National Retail Federation US ocean import volume report projects June arrivals to be 2% lower than May, with volumes increasing 4% month on month in July before easing slightly in August and further in September. If these estimates materialize, transpacific peak season will be a muted one relative to recent years, with the July peak 8% lower than last year’s tariff driven burst, but also 6% lower than the August peak in 2024.  

Air cargo is stabilizing – with rates easing but still very elevated on most lanes – as Gulf airspace gradually reopens and jet fuel prices ease from April highs. 

Elevated jet fuel prices are contributing to global air cargo rates that are 30% higher than before the war and year on year. Higher costs are pushing some volumes away from the skies when feasible, including some Asia - Europe shippers opting for ocean-air services via West Coast US ports. 

Overall though, the market is stabilizing as air space closures decrease and capacity from Gulf carriers continues to recover. Jet fuel prices have also leveled out after coming down from April highs as the market has shifted sourcing for jet fuel – and energy exports more generally – to the extent possible to account for the Persian Gulf export drop, and as demand for fuel has also eased as carriers scrap unprofitable flights.

Freightos Air Index rates show China - Rates decreased slightly or were level on most major lanes last week. Prices out of China were stable at $5.47/kg to N. America and dipped 3% to $5.16/kg to Europe. While China - US rates are now back to pre-war levels, prices to Europe remain 50% higher, but down 15% from their peak in April. S. Asia - Europe rates were stable at $4.66/kg last week – a level 80% higher than in February – but down 10% from a month ago. SEA - Europe prices meanwhile were up double digits last week to a new high of $5.74/kg.

The US Court of International Trade struck down Section 122 tariffs for the named plaintiffs, opening the door to broader refund claims even as the White House appeals and seeks to keep the tariffs in place during the process, or until they expire in July.

US tariffs on China are lower at the moment than before the US Supreme Court invalidated Trump’s IEEPA-based tariffs in February. The White House replaced IEEPA duties with a 10% global tariff based on Section 122 that is set to expire in late July, with the administration working to replace the 122 duty with Section 301-based IEEPA-like tariffs by then. 

Last week though, the US Court of International Trade ruled that the president’s use of Section 122 was invalid. The ruling and the court-required refunds were limited to the specific plaintiffs in the case, but open the door for other businesses to sue as well. The White House has appealed the ruling and asked that the tariffs stay in place during the appeals process or until they expire, but these developments do set the stage for another possible widespread tariff refund.