Freightos Baltic: Container rates hold near cyclical highs as Hormuz tensions, congestion, and strikes compound

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Transpacific rates eased slightly last week after holding at peak-season levels since early July, pointing to a plateau rather than further increases as peak season winds down. West Coast rates near $7,600/FEU and East Coast rates near $9,500/FEU are back in line with 2024's peak, when seasonal demand, Red Sea rerouting and East Coast strike-related frontloading drove a similar surge. Typhoon-driven congestion at Far East hubs is adding to the pressure, with carriers blanking more sailings this week to recover storm-disrupted schedules, a move that could keep rates firm even as underlying demand softens.

On the Asia-Europe lanes, rates slipped modestly last week to $4,500/FEU for North Europe and $4,700/FEU for the Mediterranean, with Mediterranean pricing falling further this week to roughly match North Europe. That marks a shift from the historical pattern since 2017, in which Mediterranean rates have averaged 17% above North Europe, though the gap has occasionally inverted. The Mediterranean's steeper pullback from peak, down $2,600/FEU or 37%, versus a $1,300/FEU or 23% decline for North Europe, likely reflects a pickup in Red Sea transits on some Mediterranean services, while North Europe congestion is keeping rates comparatively sticky despite cooling peak-season demand.

Even after these declines, both lanes remain $1,000-1,700/FEU above pre-peak levels, a gap still tied largely to Far East congestion and now compounded by port worker strikes in Germany and the Netherlands.

Bunker prices have climbed back to June levels, now running about 60% above pre-war pricing, as tensions between Iran and the US around the Strait of Hormuz escalate further and Chinese crude buying picks up. Tehran has signalled plans for a broader exclusion zone around the waterway, adding a fresh layer of risk premium on top of the uptrend that began after July's ceasefire collapse. The higher fuel floor is starting to underpin container rates generally, though capacity and demand dynamics remain the dominant forces on ocean pricing for now.

Panama Canal transit conditions remain a watch item: the Panama Canal Authority has shelved a planned half-foot additional draft reduction for Neopanamax vessels for now, even as it braces for a possible El Nino-driven drought later in the year. Daily transits have been trimmed by four to 32 this month, but Neopanamax slots, the ones used by long-haul container ships, have absorbed just a one-slot cut so far.

Taken together, the picture is one of rates holding near cyclical highs on a mix of overlapping pressures rather than pure peak-season demand: Middle East geopolitical risk lifting the fuel cost floor, weather-driven congestion at Far East hubs, and European labour action adding friction even as underlying transpacific and Asia-Europe demand shows early signs of cooling.

Written by: Farid Muzaffar