Freight This Week: Container Rates Slide as Tanker Costs Surge Through Hormuz

Container freight rates extended their decline for a fifteenth straight week even as oil tanker shipping costs surged to record highs on risks in the Strait of Hormuz. The divergence highlights how geopolitical disruption in energy markets has completely decoupled from container shipping dynamics ahead of China Golden Week factory shutdowns.

Container rates dropped further as the Drewry World Container Index dropped 7.9 percent to $1,761 per 40-foot equivalent unit on September 11, down from $1,913 the previous week. Shanghai to Los Angeles rates fell 10 percent to $2,311 per FEU while Shanghai to New York declined 8 percent to $3,278 per FEU. The Freightos Baltic Index showed a similar pattern with Asia to West Coast prices at $2,295 and Asia to East Coast at $3,630. Both benchmarks are now well below early September levels as carriers cut capacity ahead of factory shutdowns that begin October 1 in China.

Crude shipping moved in the opposite direction in crude shipping. Very large crude carrier rates from the Middle East to China reached roughly 450 on a Worldscale basis, equivalent to about $11.50 per barrel, according to Baltic Exchange data. That represents a 154 percent week-on-week increase for Middle East China routes and pushed the TD3C benchmark near $980,000 per day, up approximately 900 percent year over year. The Breakwave Tanker Shipping ETF has gained about 3,600 percent this year on the freight spike. Our latest on the crude rally, Oil Rally on Supply Concerns: How Far Can It Go?, examines how far the move can run.

War risk insurance compounded the cost surge. Premiums for Gulf transits rose from about 0.25 percent of hull value before the conflict to between 3 and 10 percent, according to Lloyd's Market Association estimates, effectively pricing some operators out of the market. Roughly 15 million barrels per day of crude and 2.5 million barrels per day of products transit the Strait of Hormuz, along with around 20 percent of global liquefied natural gas and one third of liquefied petroleum gas. Vessel traffic through the chokepoint fell to seven transits on Wednesday from 12 the previous day, preliminary tracking data showed, below the 10 day average of 14. For the oil market reading of the chokepoint risk, see Crude Cedes the Hormuz Spike as Pipeline Clock Ticks Down.

The disruption has already lengthened lead times for energy shipments even as container operations showed improvement on schedule reliability. Global on-time vessel performance rose to 54.8 percent in September, an 8 percentage point improvement from the same month last year. Average arrival delays for late vessels decreased to 3.8 days from 4 days in August. However, operational bottlenecks persisted at US West Coast terminals where working times rather than anchorage delays dominated. Zim vessels spent 254 hours at berth in Long Beach and ONE vessels logged 233 hours, according to SeaVantage data. Maersk recorded 166 hours at berth in Los Angeles and HMM 163 hours, indicating throughput constraints rather than berthing wait times.

These divergent cost structures translate directly to retail pricing and delivery windows. Container rate declines should ease landed costs for consumer goods by roughly 2 to 3 percent in Q4, assuming carriers maintain capacity discipline during Golden Week cancellations. Meanwhile, tanker surge effects will reach US gasoline and diesel prices within 2 to 3 weeks as the shipped volume moves through the refining and distribution chain. The pump impact is already visible in Gasoline Prices Jump as WTI Near 7 and Hormuz Premium Hits the Pump. Energy market forward contracts already priced in much of the freight risk, but physical fuel price pass-through typically lags shipping moves by 10 to 14 days. Retail importers negotiating 2027 contracts should build in a buffer for potential freight volatility if Middle East tensions escalate further, particularly on direct Asia to East Coast routes that rely on Panama Canal access when Suez routes are constrained.

Carriers are preparing for another cost shock with US port fees on Chinese-built, owned or operated vessels scheduled to begin October 14. Chinese flagged vessels or those owned by Chinese enterprises face a flat fee of $80 per net tonnage per voyage to US ports. Non-Chinese operators of Chinese-built ships must pay the higher of either $23 per net tonnage or $154 per 20-foot equivalent unit capacity. Analysts estimate the top 10 carriers could face $3.2 billion in fees next year. COSCO, including its OOCL fleet, is most exposed with projected fees up to $1.53 billion. Beijing responded with a decree pledging countermeasures against discriminatory measures on Chinese ships or crews.

The next scheduled release on container rates will be the Freightos Baltic Index update on Friday, October 2. Drewry publishes its World Container Index on Thursday, October 1. Baltic Exchange dry bulk assessments are released daily. The US Trade Representative port fee implementation deadline is October 14.

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