Ocean Container Shipping Rates Near Record as Iran War Drives Fuel Costs
Rising Shipping Rates and Fuel Costs Amid Middle East Tensions
By Lisa Baertlein
Surge in Container Shipping Rates
LOS ANGELES, Sept 17 (Reuters) - The off-contract ocean container shipping rate from China to the U.S. East Coast has returned to levels seen after COVID-19 upended global trade, and could set new record highs as the U.S. and Israeli war on Iran drives fuel costs higher.
The spot rates on that route hit $10,948 per 40-foot container, more than quadrupling since the start of the Iran war on February 28, according to data from freight pricing platform Xeneta.
Comparison to Previous Highs
"That leaves freight rates on these critical trades just short of the all-time high set during the COVID-19 disruption," Peter Sand, Xeneta's chief analyst, said of the route, where rates hit a record $11,900 in January 2022. The Shanghai to New York route is among the busiest and most profitable for global container carriers, including MSC, Maersk, COSCO and CMA CGM.
Impact of Middle East Conflict on Oil and Fuel Prices
Crude oil prices soared after hostilities intensified with the U.S. and Iran attacking and sinking some oil tankers in the Strait of Hormuz and Saudi Arabia closing its vital East-West pipeline due to aerial attacks in the widening Middle East war.
Increase in Bunker Fuel Costs
Those events pushed up the global 20-port average price for the very low sulphur fuel oil, known as bunker, used by many container ships. It hit $901.50 per metric ton on Thursday, up from $543.50 per metric ton on February 27 but still below the March 20 peak of $1,053 per metric ton, according to marine fuel price publisher Ship & Bunker. Container ship owners recoup those higher costs via surcharges and other pricing tools.
Potential for New Record Highs
"With bunker prices pushing fuel surcharges higher, surpassing the pandemic peak cannot be ruled out," Sand said of the China to East Coast container spot rate. A new record would most likely come this month, with the traditional Golden Week volume spike driven by shippers, including Walmart and Amazon.com rushing goods out of China before factories close in early October for a mandatory holiday break, he said.
Market Data and Future Outlook
Week-over-week spot rates from Shanghai to New York jumped nearly 7% to $10,394 per 40-foot container, according to the Drewry World Container Index (WCI) data on Thursday.
Golden Week and Rate Methodologies
Drewry also expects Golden Week shipments to send the rate higher.
Drewry and Xeneta use different methodologies for their data on spot rates, which, depending on market dynamics, can apply to around half of cargo on the water.
Historical Context of Spot Rates
Drewry's WCI Shanghai to New York spot rate peaked at $16,000 early in the pandemic when homebound consumers were using federal incentive money to splurge on furniture, big-screen televisions and home exercise equipment.
(Reporting by Lisa Baertlein; Editing by Aurora Ellis)