Freightos Baltic: Freight softened on unwind demand; geopolitical tensions expected to limit downside

 Read more on Freightos

Container spot rates eased slightly this week, the first such move since April, even as fuel costs climbed on widening Middle East conflict. Carriers had lined up GRIs and PSSs for July 15, but rates slipped instead across major east-west lanes, with Asia-US East Coast flat and West Coast, Asia-Mediterranean routes still softening.

Two forces are driving that: carriers adding capacity, and an unwinding of the peak demand season. The added capacity traces to extra loaders deployed for June's frontloaded surge, now landing as demand cools, weighted more toward West Coast services, hence the faster easing there.

That frontloading itself was a response against new tariff moves from the Trump administration. The 24 July deadline, when 10% global Section 122 tariffs expire, pulled US imports forward. Washington is expected to replace them with 10-12.5% Section 301 duties on sixty partners over forced labour concerns, holding levels near the status quo. Separately, unresolved 301 investigations into excess capacity in sixteen countries could see action delayed until after the midterms, toward IEEPA levels. President Donald Trump has also announced 50% tariffs on about 5% of Canadian exports, effective in thirty days.

Offsetting the rate softening is serious Far East port congestion. Delays worsened after Typhoon Bavi forced temporary shutdowns, leaving vessels bunched in Shanghai and Ningbo, multi-day queues in Qingdao, and knock-on delays across eastern China, Taiwan, South Korea and the Philippines, with some carriers omitting calls and shifting volumes to alternative ports. A separate gas leak briefly halted several Antwerp terminals.

Underlying this is sharper Middle East escalation. The US and Iran have exchanged strikes for ten straight days, reaching neighbouring states, regional vessels, and US positions in Jordan. Hormuz transit has slowed to a trickle, and fighting has spread to Bab el Mandeb. The 2022 Saudi-Houthi ceasefire has also frayed: after Saudi forces struck Sanaa airport to block a flight from Iran, the Houthis closed the Red Sea channel to Saudi-linked vessels and ships calling at Saudi ports.

Energy flows are most exposed, since Saudi Arabia routes much pre-war oil volume around Hormuz via pipeline to Jeddah, a route now at risk. Container traffic is more insulated, as major carriers reach the Gulf via the Mediterranean and northern Red Sea, though CMA CGM and Maersk could still reverse recent Red Sea moves. Fuel costs already reflect the escalation: crude up 20%, bunkers up 12%, jet fuel up 25% and now 50% above the pre-war baseline.

Written by: Farid Muzaffar