Container Bytes #39: The Oversupply Paradox and Far East Port Gridlock

Welcome back to Container Bytes! 📍 It’s July, and the Strait of Hormuz is locked in a dangerous pattern of starts, stops, and serious military escalations. Yet, the energy market is throwing a complete curveball: crude oil prices have unexpectedly plummeted back to pre-war baselines. Instead of the catastrophic energy shortages predicted months ago, the industry is suddenly bracing for a global oil oversupply.

In this episode, Julia Frohwein and Judah Levine unpack this paradox. While crude supply has recovered due to strategic reserves and alternative land pipelines, refined transportation fuels like bunker and jet fuel remain stubbornly high and slow to clear.

We also break down the state of play in the Ocean Container Market. We are officially in the thick of peak season, with Transpacific rates soaring to $6,700/FEU to the West Coast and $8,700/FEU to the East Coast. Carriers have injected record-breaking capacity to chase these margins, but a massive wall of congestion—triggered by severe weather, dense fog, and unprecedented demand—is gridlocking major Asian hubs like Shanghai, Ningbo, and Singapore.

Finally, we track the immediate fallout of the July 1st EU De Minimis Abolition. The duty-free loophole is officially closed, and the air cargo market is already registering a sharp, immediate contraction in e-commerce charter capacity.

Chapters: 

• 00:00:00 — Escalation and the Surprising Rebound: The oil oversupply reality. 
• 00:01:45 — The Refined Fuel Lag: Why bunker and jet fuel are lagging behind crude. 
• 00:02:30 — Peak Season Reality Check: Breaking down the $8,700 East Coast milestone. 
• 00:03:30 — Structural Front-Loading: De-linking the US tariff rush from Asia-Europe volumes. 
• 00:04:45 — Far East Port Gridlock: How Shanghai fog and Singapore delays are locking up ships. 
• 00:06:00 — Air Cargo Shockwave: The July 1st EU de minimis cliff cuts air capacity.

This podcast is a little experiment from Freightos—and may not be around forever—so if you dig quick bites of freight wisdom, let us know. 

For more detailed weekly freight updates delivered straight to your inbox, check out our weekly freight email. Want the freshest freight data on demand? Hit up terminal.freightos.com.

Transcript

SPEAKER_01 0:00

Hi there, I am Julia Frowein, joined by Judah Levine, our freight expert. Welcome to today's episode of Container Bites, your 10 minute update on the latest in freight. Judah, how are you today?

SPEAKER_00 0:10

I'm doing well. How are you doing?

SPEAKER_01 0:11

Yes, I'm also doing well. All right, let's get going. So let's start with the Strait of Hermes for a change. There have been multiple examples of attacks, Iranian attacks on vessels in the region over the last few weeks, despite the start of the ceasefire. The aim seemingly is to deter transits through the strait, uh other than its own channel. And just yesterday, even we had some more serious escalation, including US retaliations. So we've said here before that the biggest impact for freight markets isn't really the blockade of the vessels, but actually the cost of oil and bunker fuel. So are prices going up as a result of this renewed escalation?

SPEAKER_00 0:47

So rent has gone up a little bit just in terms of the latest kind of back and forth, as you mentioned, but really um more or less oil prices are back to where they were pre-war. Um and in fact, there has been kind of a surprising rebound or uh a surprising speed at which oil prices have gone back, and oil supply has recovered. So, you know, there are these starts and stops. Traffic through the street is not back where it was. Some days it reaches maybe half of what it used to be, but most days less. But nonetheless, the release of those volumes plus just the fact that over time the you know the energy industry has been working to find alternatives to passing oil just by via water through the strait, um, and also just alternative sources of production and releases from strategic reserves and everything else. So there's actually now concerns of oversupply of oil when you know the concern this entire time was that there was going to be a shortage. Um, so really we haven't seen that impact uh oil prices very much, even though we're seeing kind of um you know deterioration maybe in uh in the strait, but we're seeing oil prices back to where they were. For bunker and for uh jet fuel, we've seen prices come down too, but they still remain elevated above where they were because you know these are refined products. So it takes time to recruit oil to reach those markets and then become uh refined products that reach the um you know transportation industries. So that seems to be taking a little bit more time. Fuel prices are certainly down from where they were initially.

SPEAKER_01 2:19

Okay, so does that all mean that container prices might start easing soon also?

SPEAKER_00 2:23

So once the bunker fuel prices go back to where they were, that will remove one element of upper pressure on rates. But right now we're really in um the thick of peak season for ocean container uh market. And so even if fuel prices dropped, you probably won't see it reflected in the prices very much. So we had prices for the Trans-Pacific increase um by about $1,000 to start the month of July. They're up about $3,000 compared to the very end of May. So we've had an early and strong uh couple months of peak season so far. There are different reasons for why this is coming early, as I think we've mentioned here before. One is there will be tariff deadlines in um just a couple weeks for the US, and so tariff levels would probably increase for imports from many countries. We also had big uh fuel adjustment factors, so kind of quarterly uh fuel prices that some of the big shippers pay. Those are increasing to start July, so that was one factor. We also had manufacturer prices that adjust quarterly that were going to go up. So we had various front loading for various reasons. We've seen this this big increase in rates for uh Trans-Pacific rates to the West Coast are about $6,700 per 40 for the container to the East Coast, $8,700 per container. Carriers are adding capacity to these lanes to that shows that that ships are full, and that shows that demand is is strong. And there are additional increases announced for July, some for mid-July, some very significant ones. But there are also kind of uh talk within the industry that maybe we're already reaching the peak uh of demand, and so maybe we'll see prices increase middle month, maybe we won't, maybe they'll kind of stay elevated. But towards the end of the month, there's expectations that we might already be past that peak because it started sort of in the middle.

SPEAKER_01 4:03

And what about Asia Europe? Is it a different story there?

SPEAKER_00 4:05

So uh a similar story, rates increased likewise by $1,000 per container to start the month. They had increased by about $2,000, completely to about $3,000 in the Trans-Pacific. Um, over the course of June. Rates are very elevated, they're almost at $5,500 Asia Europe and $7,100 Asia Mediterranean. So these are really um elevated prices. Similar story that uh carriers have added capacity, their record levels of capacity right now. So that shows that rates are high and capacity is high. That means that demand is strong. But likewise, there's talk here that maybe the mid-month increases won't take to their full extent or won't take at all, and that we're just about at the peak of demand because there's an early peak season here too. So if we saw an early peak season for Asia Europe as well as the Trans-Pacific, it means that tariffs aren't the only driver because the tariffs aren't a factor for Asia Europe trade. So that means that these other factors were reasons for an early start for Asia Europe as well. For both these lanes, though, another factor which might keep um rates and uh kind of volumes or bookings higher than maybe they otherwise would have been at this point, because uh ideally things were front-loaded, um, is congestion. So we had some pre-existing congestion at some of the major hubs in Europe, but really primarily in the Far East. And these are getting worse because of the big increase in demand and also because of um bad weather. There's been serious fogs. So there's been serious congestion in some major ports like Shanghai, Ningbo, but also in Singapore, in Korea, also in Sri Lanka. So there is congestion adding on top of this, which could stretch how long uh rates stay at their peak just because capacity is being reduced and there's still this backlog of demand that still wants to be moved. Otherwise it would have been moved already. So it might stretch a little bit further on than it otherwise would have, given that a lot of um pull demand forward.

SPEAKER_01 5:54

Okay, okay, interesting. And okay, moving on to air cargo now. Um are the changes in oil prices having any impact there?

SPEAKER_00 6:00

So no dramatic impact compared to where we've been, you know, over the last maybe month. But as we said in air cargo as well, uh jet fuel prices will come way down for where they were in April. They're only about 15 to 20 percent higher than their pre-war baseline, so that's still elevated. And we've seen something similar in rates. They haven't come down maybe as dramatically from peaks that they hit you know earlier within this wartime period, but they're definitely lower than they were and more or less level now, but at elevated uh levels. One of the bigger stories in air cargo right now is that the EU canceled its de minimis exemption, and that happened on July 1st. And there actually was a pretty significant drop in capacity. So, as we've said before, de minimis is a big facilitator of low-value goods going by high-cost uh air transportation. And when this happened on the Trans-Pacific, when the US canceled their de minimis, there was an initial, you know, very significant drop in volumes and then a kind of a gradual recovery. So we've seen a you know a meaningful drop in capacity, but we'll probably see some some kind of adjustments and leveling off as we kind of move as the industry adjusts.

SPEAKER_01 7:07

All right, interesting. Okay. That is all we have time for today. Thank you, Judah. If you enjoyed this session, please hit the subscribe button and you'll get notified about all our future episodes. Thank you for listening and have a great day.