Freight Markets Settle
Dear Readers,
Since mid-May, importers have faced a steady bi-weekly climb in Transpacific eastbound freight costs. China to US East Coast rates have gone from the low $3,000/40H range to roughly $8,000–$9,000/40H in about eight weeks, an increase of around 85%. West Coast rates have run even harder — up roughly 120% over the same stretch to about $6,800–$7,500/40H. Space constraints started in China and Southeast Asia and have now spread fully into India, with severe 40' equipment shortages across the region.
How we got here. Volatility hit the market like a tornado. The Iranian conflict and the Strait of Hormuz closure drove an unexpected surge in bunker costs and rattled everyone this spring. With retail inventories already thin and the memory of pandemic-era chaos still fresh, the majority of major importers rushed ahead to front-load late summer and fall cargo. Peak season arrived roughly eight weeks early as a result. The steamship lines watched the panic ensue and responded exactly as you'd expect: more blank sailings, rejected contract slot allocations, and one rate increase after another. Which brings us to today.
July 15. Rates have been dispatched, and what we see is the first settling phase of rate movement. No further spikes to East Coast spot rates. West Coast rates came off modestly, and the major inland ramps — Chicago, Dallas, Memphis — took nominal decreases in step with the West Coast. The lines are not finished pushing, though. GRIs of $2,000–$3,000/40H are landing today, and peak season surcharges from CMA CGM ($4,000/FEU as of July 10) and HMM ($3,000/40H as of July 15) sit on top of that. How much of it sticks is the open question, and early signs suggest they won’t catch on and were likely attached to pursuing higher rates when the June market was on fire.
Outlook. Predicting importer demand and the US appetite is never easy, but it does appear we have crested the worst of it for the time being. Our steamship lines are beginning to reopen fixed-rate allocations and are willing to listen to requests for special rates case by case to secure better pricing on certain shipments. Our opinion is that the market continues to settle, with further reductions to West Coast ports likely before July's end, and we are hopeful East Coast levels will not be far behind. September is most likely to mark the real decreases we need to bring pricing closer to historic levels. One point in your favor: because this peak started so early, it may also unwind early.
Obstacles. The near-term drag on recovery is seasonal typhoons in Asia. Shanghai, Ningbo-Zhoushan, Xiamen and Taiwan were hit hard by Typhoon Bavi between July 10 and 12. Evacuations followed and port operations were suspended. Shanghai terminals resumed full container handling early Monday, July 13, and Ningbo is coming back terminal by terminal. Keep in mind that gates reopening is not the same as schedules normalizing — pilotage, berth sequencing and the repositioning of diverted vessels all take time, and several carriers have already omitted Shanghai and Ningbo calls with contingency routings in place. Expect two or more weeks minimum to clear. Worth noting that global congestion was already at its worst level since 2022 before Bavi arrived, with roughly 3.6 million TEU waiting at anchorage — about 10.6% of the world fleet — much of it concentrated at a handful of Asian ports.
Panama Canal. The second and more severe risk to global logistics stability within sight is Canal functionality as we enter drought season. NOAA declared El Niño conditions on June 11, and the Panama Canal Authority has been tightening steadily since: Neopanamax draft dropped to 49.5 feet on July 3, goes to 49.0 feet on July 24, and to 48.5 feet on August 15. Gatun Locks also has dry chamber maintenance on the West Lane July 21–22, which reduces available Panamax slots.
To be clear, these moves are precautionary. Gatun Lake levels are healthy right now — 2025 rainfall was strong and this year's dry season was among the wettest since 1950. The concern is what comes next. Historically the sharpest El Niño effects on the Canal show up in the following year, as they did in 2015–16 and again in 2023–24, and NOAA now puts the odds of El Niño formation near year-end at 98%. If it develops as forecast, PC surcharges, reduced shipping weight and other setbacks could become a real cost factor into 2027 and support further rate inflation. We are watching it closely.
One more item worth your attention. The 10% Section 122 surcharge hits its 150-day statutory limit on July 24 and expires unless Congress acts. Timing matters here: entries made on or after the 24th could drop 10 percentage points of duty exposure. Two cautions. First, Section 301 and 232 actions are already in motion and could replace some of that exposure product by product, so a lapse is not automatically a clean 10% savings. Second, the Court of International Trade struck the surcharge down in May and the Federal Circuit stayed that ruling in June, so the duty is still being collected and refund rights may become relevant later — preserve your documentation now. The new Secion 301 Forced Labor Initiative is a likely threat, to replace the current 10% with a newly proposed 12.5%.
As always, we are here to help you navigate it.
— The Chain Logic Team
