China-US Shipping Rates Surge as Iran War Pushes Fuel Costs Higher

Container shipping rates from China to the US East Coast have climbed back toward levels last seen during the disruption caused by the Covid-19 pandemic, with higher fuel costs from the widening Middle East conflict raising the prospect of new records.

Spot rates from China to the US East Coast reached $10,948 per 40-foot container, more than four times their level when the US and Israeli war on Iran began on February 28, according to freight pricing platform Xeneta.

The latest rate is approaching the record of $11,900 recorded on the Shanghai to New York route in January 2022, when pandemic-related disruptions caused severe congestion across global shipping networks.

“That leaves freight rates on these critical trades just short of the all-time high set during the COVID-19 disruption,” said Peter Sand, chief analyst at Xeneta.

The Shanghai to New York route is one of the busiest and most commercially important container shipping corridors, serving major carriers including MSC, Maersk, COSCO and CMA CGM.

The rise in shipping costs has coincided with a sharp increase in crude oil prices as the conflict in the Middle East has intensified. Attacks involving oil tankers in the Strait of Hormuz and the closure of Saudi Arabia’s East-West pipeline following aerial attacks have added pressure to global energy markets.

Higher oil prices have also increased the cost of marine fuel used by container ships. The global average price across 20 major ports for very low sulfur fuel oil, commonly known as bunker fuel, reached $901.50 per metric ton on Thursday, according to Ship & Bunker.

That compared with $543.50 per metric ton on February 27, the day before the war began. However, the latest price remained below the March 20 peak of $1,053 per metric ton.

Shipping companies typically pass higher fuel expenses to customers through fuel surcharges and other pricing measures.

“With bunker prices pushing fuel surcharges higher, surpassing the pandemic peak cannot be ruled out,” Sand said.

He said a new record could be reached this month as companies prepare for China’s Golden Week holiday in early October. Shippers including Walmart and Amazon are expected to move additional goods ahead of factory closures during the holiday period.

Separate data from Drewry’s World Container Index showed that weekly spot rates from Shanghai to New York rose nearly 7 per cent to $10,394 per 40-foot container on Thursday.

Drewry also expects shipments ahead of Golden Week to place further upward pressure on rates.

Xeneta and Drewry use different methods to calculate shipping rates, and spot prices can apply to roughly half of cargo being transported, depending on market conditions.

Drewry’s Shanghai-New York rate reached about $16,000 during the pandemic, when consumers confined to their homes increased spending on furniture, electronics and exercise equipment, contributing to unprecedented demand for container shipping.