Latest / Container Bytes: Weekly Ocean & Air Freight Intelligence for Supply Chain Pros / Container Bytes #47: Red Sea Capacity Effects, Panama Adjustments, and Air Disruptions

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Container Bytes #47: Red Sea Capacity Effects, Panama Adjustments, and Air Disruptions · Container Bytes: Weekly Ocean & Air Freight Intelligence for Supply Chain Pros

• 0:01
  SPEAKER_01: Hi, and welcome to today's episode of Container Bites, your ten minute update on the latest in freight.
• 0:06
  SPEAKER_01: I am Julia Frowine, as always joined by Judah Levine, our resident freight expert.
• 0:11
  SPEAKER_01: Judah, how are you doing today?
• 0:14
  SPEAKER_01: Yeah, doing a lot better than last week.
• 0:16
  SPEAKER_01: Definitely less uh congested, so that's a win.
• 0:19
  SPEAKER_00: If only portray less congested.
• 0:22
  SPEAKER_00: That's freight humor.
• 0:24
  SPEAKER_01: Speaking of which, things are escalating significantly in the Strait of Hormuz once again.
• 0:31
  SPEAKER_01: And for freight, that means fuel costs are climbing again.
• 0:34
  SPEAKER_01: So for ocean freight, fuel surcharges may be keeping the flaw for rates elevated.
• 0:39
  SPEAKER_01: But for now, overall, rate levels are being driven by other factors.
• 0:42
  SPEAKER_01: So let's start with the Trans-Pacific.
• 0:44
  SPEAKER_01: Do we see this year's peak season coming to an end just yet?
• 0:47
  SPEAKER_00: Yeah, so starting with fuel costs, there have been really significant escalations in terms of the attacks back and forth between Iran and the US.
• 0:56
  SPEAKER_00: 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.
• 1:05
  SPEAKER_00: In addition, we have some uh increase in Chinese demand for crude oil, which uh for a lot of the year um has been a big easing factor in terms of pressure on rates because there's been very little uh Chinese imports.
• 1:19
  SPEAKER_00: They've been relying on reserves and things like that.
• 1:22
  SPEAKER_00: So that's starting to push uh some demand up as well.
• 1:25
  SPEAKER_00: In any case, we see bunker fuel prices back to where they were in June.
• 1:29
  SPEAKER_00: Jet fuel prices are back to where they were in May, and both of these are about 60% higher than before the war.
• 1:34
  SPEAKER_00: So we're not at the highs that we had kind of early on in the war, but rates are much uh higher than they had been really from May and on.
• 1:41
  SPEAKER_00: We had starting to see uh uh prices cooling, and now uh they're they're increasing from lows they hit in in early July when there's optimism around the ceasefire.
• 1:50
  SPEAKER_00: In any case, moving to ocean rates, as you said, you're not really seeing changes in oil prices uh um influencing changes in uh container prices because there are other forces that are having kind of a larger impact.
• 2:02
  SPEAKER_00: But as you said, there probably is a higher floor because of what fuel costs are doing.
• 2:06
  SPEAKER_00: So, in terms of Tran-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.
• 2:16
  SPEAKER_00: We're likely in the last few weeks, right?
• 2:17
  SPEAKER_00: We have uh Golden Week coming up.
• 2:19
  SPEAKER_00: It's possible there'd be some additional demand afterwards, but um, because peak season kind of started so early, it's likely that it won't, but of course, who knows?
• 2:28
  SPEAKER_00: Um, but as we know, you know, peak season started early.
• 2:32
  SPEAKER_00: We've seen rates kind of at peak levels and somewhat increasing, at least for the East Coast since early July.
• 2:38
  SPEAKER_00: Current rates are at uh 7,600 uh per FU to the West Coast and 95 to the East Coast.
• 2:44
  SPEAKER_00: So they're about back to levels that we've last seen in during peak season of 2024.
• 2:48
  SPEAKER_00: Peak season during 2024, we had you know seasonal demand, but we also had red sea disruptions, which were absorbing uh capacity for the first time, and then that effect was at its strongest.
• 2:58
  SPEAKER_00: There's also some front loading, so you had to have kind of multiple factors combining to push rates up this high last time, and that's what we're seeing this time as well.
• 3:06
  SPEAKER_00: One of those factors, in addition to kind of the early uh demand, the surging demand, different um factors in terms of capacity.
• 3:14
  SPEAKER_00: We also have really significant congestion in the Far East, which continues.
• 3:18
  SPEAKER_00: We've had just a series of typhoons that have kept disrupting operations and causing long lines and long waits and effectively absorbing capacity and reducing capacity.
• 3:27
  SPEAKER_00: So that's another factor here.
• 3:29
  SPEAKER_00: There are carriers announced some uh additional blank sailings for for this week, and that's either to kind of to you know keep uh vessels fuel but full, but it might also be because carriers are um you know not going to make those sailings because of these delays because of that congestion.
• 3:46
  SPEAKER_00: These are for kind of uh schedule recovery, which we might be seeing as well.
• 3:49
  SPEAKER_00: Either way, those are factors which will probably help it keep rates elevated, even if demand is starting to ease.
• 3:54
  SPEAKER_01: Okay, we've also seen the Panama Canal Authority has eased some restrictions planned for October.
• 4:00
  SPEAKER_01: Is this good news for shippers that are on this lane?
• 4:02
  SPEAKER_00: So right.
• 4:03
  SPEAKER_00: So the the Panama Canal Authority is expecting um drought conditions.
• 4:08
  SPEAKER_00: The Panama Canal operates on fresh water from a nearby lake, and they need to kind of conserve water in order to make sure that they can uh service as many vessels as possible.
• 4:17
  SPEAKER_00: So the two ways of doing that is one, reducing the the maximum uh draft for per vessels that are passing, meaning that it uses only up to a certain amount of water.
• 4:28
  SPEAKER_00: And the second one is reducing the number of transits to also use less water in that way.
• 4:32
  SPEAKER_00: So the authority has postponed an additional half foot reduction in draft, which was meant for October 1st.
• 4:39
  SPEAKER_00: It's been postponed.
• 4:40
  SPEAKER_00: They they haven't announced a date, so that's a good uh sign.
• 4:44
  SPEAKER_00: But they have reduced transits from what's normally 36 down to 32 already in September.
• 4:50
  SPEAKER_00: Now for the big, the major container lines, right?
• 4:53
  SPEAKER_00: So for Asia to the US East Coast, which is the major one, those are very large uh container ships, and most of those, or most of them are, and they usually go through the there are two different lanes.
• 5:03
  SPEAKER_00: They go through the larger one called Neo Panamax, and that one's only been reduced by one um slot.
• 5:08
  SPEAKER_00: So it's probably not the biggest disruption just yet.
• 5:11
  SPEAKER_00: We do see some carriers have made some changes, right?
• 5:14
  SPEAKER_00: They do have these draft reductions, so they can't carry as many containers as many they maybe they otherwise were.
• 5:19
  SPEAKER_00: So we might start seeing some adjustments there, maybe including the you know, a limit on the number on weight per container or the number of heavy containers that they're able to take.
• 5:29
  SPEAKER_00: Um, so so far it hasn't been, you know, as extreme as we saw the last time that we had uh the threat of drought back in 2023, but there are steps being taken, and there is still the expectation that it's going to be drought.
• 5:41
  SPEAKER_00: It's possible that they've kind of started earlier with water levels higher in the lake than we did last time that to kind of spread out the restrictions to have uh uh less of a pronounced impact.
• 5:52
  SPEAKER_00: There are still some surcharges by carriers announced for end of September or of October, so we'll see if those materialize just yet or not.
• 5:58
  SPEAKER_01: And what about the Asia Europe ocean freight?
• 6:00
  SPEAKER_01: What are rates doing?
• 6:01
  SPEAKER_00: So for Asia Europe, as we said, we had an early start to peak season on uh across the East-West lanes, and those rates have kind of continued to come down, but only gradually since those highs in in early July.
• 6:12
  SPEAKER_00: So Asia Europe rates ticked down slightly last week for both lanes to about 4,500 per FEU to North Europe and 47th to the Mediterranean, though prices this week have cooled further for the Mediterranean, so that now the two are about on part, about$4,500 or less.
• 6:26
  SPEAKER_00: And these are well down from like$6,000,$7,000 per container back in July.
• 6:30
  SPEAKER_00: Going back to 2017, in general, Asia and Mediterranean rates have been about 17% higher or more expensive than Europe rates.
• 6:38
  SPEAKER_00: So the fact that they're back at the same level um is unusual.
• 6:41
  SPEAKER_01: Okay, interesting.
• 6:42
  SPEAKER_01: Why is there a difference in the behavior?
• 6:43
  SPEAKER_00: So not exactly sure.
• 6:45
  SPEAKER_00: There may be a couple things.
• 6:46
  SPEAKER_00: One is that as we know, the some cars have started uh transiting the Red Sea.
• 6:51
  SPEAKER_00: Again, at least on parts of their services, there have been estimations by sea intelligence that it's about 19% of Asia-Europe uh volumes are going through the Red Sea.
• 6:59
  SPEAKER_00: A lot of these are going to the Mediterranean, so because there's this shorter distance, uh there's kind of an effective increase in capacity, and so we might be seeing rates come down for that reason.
• 7:10
  SPEAKER_00: The other factor is congestion.
• 7:12
  SPEAKER_00: So, as we said, you know, both these lanes, Asia, Europe and Mediterranean, are dealing with Far East congestion, but North Europe also has its own problems with congestion and hubs in hubs there.
• 7:22
  SPEAKER_00: There have just been kind of chronic problems with congestion and North Europe hubs that high end will kind of the largest uh vessels, but they've also been dealing with low water levels in the Rhine, which has been backing up containers into those ports.
• 7:34
  SPEAKER_00: And just this week there were two port labor strikes that were impacting uh those port operations as well.
• 7:41
  SPEAKER_00: So this might reflect the difference there where North Europe is dealing with congestion kind of on both ends, whereas Mediterranean is only dealing with the origins.
• 7:47
  SPEAKER_01: And lastly, let's move to some air cargo.
• 7:49
  SPEAKER_01: There were several disruptions this past week.
• 7:52
  SPEAKER_01: How have those impacted rates?
• 7:54
  SPEAKER_00: Yeah, so in air cargo, unfortunately, there was an Amazon air freighter crash at Miami International Airport that shut down some runways there for but just temporarily, those have come back online.
• 8:07
  SPEAKER_00: Um there is a major volcanic explosion in Indonesia that was shut down uh all airports there for some days.
• 8:13
  SPEAKER_00: I think this started on Friday, and by Tuesday, most of the airports had been back into operations, but still disruptions there.
• 8:21
  SPEAKER_00: Overall, though, in terms of air cargo rates, we haven't seen anything too drastic.
• 8:24
  SPEAKER_00: From the Far East, we saw increases about 5%, both to North America and to Europe, about$6.30 to the US, and then$4.88 per kilo to Europe.
• 8:34
  SPEAKER_00: Uh, these increases might reflect some of these ongoing disruptions.
• 8:37
  SPEAKER_00: So especially those typhoons, which impact the airports in those regions, those might be um, you know, seeing some congestion and backlogs, which are reducing capacity and pushing rates up a bit on those things.
• 8:48
  SPEAKER_01: Great.
• 8:48
  SPEAKER_01: Thank you, Judy.
• 8:49
  SPEAKER_01: That's all we have time for today.
• 8:50
  SPEAKER_01: If you enjoyed the session, please hit the subscribe button and you will get notified about all our future episodes.
• 8:56
  SPEAKER_01: Thank you for listening and have a great day.