Another container line returns to the Red Sea as trans-Pacific rates stay elevated
Key Takeaways
- •Asia-U.S. West Coast container rates rose 1% this week to $6,826 per FEU, according to Freightos data.
- •Asia-U.S. East Coast rates increased 2% to $9,576 per FEU.
- •Analysts said concern over possible tariff increases may have helped accelerate peak-season demand earlier than usual.
- •Mediterranean Shipping Co. has rejoined other major carriers in returning to the southern Red Sea despite renewed Houthi attacks.
- •Carrier capacity reductions, congestion at Chinese ports, and possible Panama Canal transit cuts are supporting higher trans-Pacific rates.
While unfounded fears of higher tariffs helped drive what amounted to unexpected demand by anxious shippers this summer, other geopolitical developments are keeping the container market on edge.
Asia-U.S. West Coast prices increased 1% to $6,826 per forty-foot equivalent unit (FEU), according to the latest Baltic Index from SONAR data contributor Freightos. Asia-U.S. East Coast prices were 2% higher, at $9,576 per FEU.
Events that could pressure container traffic on the trans-Pacific are being closely watched, especially because the route remains a key barometer for U.S. import demand and carrier capacity decisions. The United States is trying to tighten economic sanctions on countries doing business with Iran as the impasse over control of the Strait of Hormuz is about to enter its seventh month.
Tense U.S. trade relations with China could be further tested, although analysts say it is unlikely Beijing, Iran’s top customer for crude oil, would support the penalties. Still others point to the changing approach by the Trump administration that appears to validate Tehran’s view that it can simply wait out the remainder of the U.S. president’s term.
Mediterranean Shipping Co. has joined other global liners in a return to the southern Red Sea despite a resumption of attacks on vessels by Houthi rebels based in Yemen.
“These steps are sparking some optimism that we are seeing the start of a gradual return to normal levels of container traffic through the waterway,” wrote Freightos (NASDAQ: CRGO) analyst Judah Levine in a note to clients.
“The concern that the White House would substantially increase tariff levels to close July may have been one factor driving the early start to peak season demand and spiking container rates back in June,” Levine said. “That tariffs remained about level, and that the window until possibly higher tariffs remains open, may help explain the current, surprising, sustained container demand and peak rate levels on the trans-Pacific.”
Rates from Asia to the U.S. West Coast this week ticked up to $7,600 per FEU, last seen in early July. That is about $5,000 higher than before the start of the peak season in late May. East Coast prices have been steady near $9,000 but have gradually climbed another $800 in August.
Reductions in capacity by carriers, along with congestion at major ports in China, have also helped support elevated rates in the trans-Pacific. Those factors matter because they can tighten available space even when demand is not changing dramatically, leaving shippers with fewer booking options. Levine said trimming of transits by the Panama Canal — and carrier canal surcharges — “could put upward pressure on rates for some Asia-U.S. East Coast services.”
Read more articles by Stuart Chirls here.
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