A massive IT outage caused by a CrowdStrike update delayed or canceled thousands of flights worldwide over the weekend, crippling airport and airline systems.
While many, but not all, carriers were able to resume operations relatively quickly, affected shipments are expected to experience delays as backlogs are cleared. While some container ports and carriers have also seen outages, the impact on ocean freight has been minimal. Yemen’s Houthi rebels continued their attacks on ships in the region last week, including a deadly attack on a tanker.
The deadly Houthi drone attack in Tel Aviv also marked an escalation in the conflict, which has included retaliatory Israeli airstrikes, and raised concerns about the Houthi rebels’ ability to expand their target areas. But since most container carriers have avoided the Red Sea since December, there should be little impact on ocean freight.
Congestion at Asia’s major container hubs is less severe than it was a few weeks ago, but remains a factor limiting capacity and causing delays, including congestion caused by the reallocation of some vessels to other ports in the region, now including Taiwan.
Despite this congestion, there are signs of easing on the main east-west lanes, such as reports of lower utilization and a decline in freight rates after two and a half months of increases. Rates on these lanes fell 1% to 4% last week, still at extremely high levels, but this decline may indicate that rate pressures have passed their peak.
Part of the decline in pressures may be due to the surge in demand and spot rates over the past two months, with major carriers and new smaller players adding capacity on transpacific and Asia-Europe routes.
But if peak season pressures begin to ease earlier than usual, it may also be because a large portion of peak season volumes in North America and Europe were moved earlier than usual to gain a longer lead. Avoid delays caused by the Red Sea diversion and avoid delays later in the year and closer to the holidays, move cargo before possible labor disruptions at U.S. East Coast ports, and beat some of the new tariffs introduced in July in August.
For shippers, the rate decline will be welcome news. But with demand for peak-season goods likely to remain relatively high into September, and congestion still an issue, a gradual decline as demand eases is more likely than a rate collapse.
As long as the Red Sea diversion continues, we should not expect rates to fall below the levels seen during the demand downturn in March and April, when rates were still around double 2019 levels. For many other regions, though, including intra-Asia, the Middle East, South Asia and parts of Africa, carriers continue to announce significant GRI and peak-season surcharge increases, helped by a surge in capacity transfers to key routes out of Asia.
As demand weakens on key trade routes, capacity should gradually shift back to these low-volume trades, and rates should start to fall. On the air cargo side, B2C e-commerce demand is expected to keep volumes and rates out of China elevated during the usual low season and peak season in the fourth quarter.
Last week, Freightos Air Index rates from China fell slightly to $5.34/kg to North America and $3.38/kg to Europe, both well above typical summer freight rates. As prices have already risen in the third quarter, when demand increases in the fourth quarter, rates may be much higher than normal peak season levels.