<div class="phx-topic abstract-wrapper">Delays at the US-Mexico border are caused as much by a lack of visibility into shipments and processes as congested truck lanes.</div>

Delays at the US-Mexico border are caused as much by a lack of visibility into shipments and processes as congested truck lanes.

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<div>Truck freight is flowing more smoothly across the United States-Mexico border, but delays caused by the complicated nature of cross-border trucking are still a concern for shippers, especially as freight volumes rise and the delivery demands of US customers become more exacting.The leading concern is a lack of visibility at the border. Trucks can be tracked on either side of the boundary, but once freight is moving through Mexican and US customs and being transferred from truckload carriers to drayage drivers to a warehouse, visibility goes dark. “One of our biggest problems is when we have drivers arriving to pick...

Truck freight is flowing more smoothly across the United States-Mexico border, but delays caused by the complicated nature of cross-border trucking are still a concern for shippers, especially as freight volumes rise and the delivery demands of US customers become more exacting. The leading concern is a lack of visibility at the border. Trucks can be tracked on either side of the boundary, but once freight is moving through Mexican and US customs and being transferred from truckload carriers to drayage drivers to a warehouse, visibility goes dark. “One of our biggest problems is when we have drivers arriving to pick up freight in Laredo and we don’t even know if that freight has crossed the border,” said Ari Stern, logistics director at Sherwood Food Distributors, an independent meat distributor based in Detroit. Sherwood ships more than 20 million pounds of food weekly through a network of US distribution centers in Atlanta, Cleveland, Detroit, Miami, and Orlando. Approximately 20 to 25 percent of that product is Mexican beef shipped to the United States through Laredo, Texas. Most of the beef is fresh, Stern said, with strict deliver-by dates applying to most shipments. The inability to quickly locate a shipment or put it on a northbound truck on the date promised puts Sherwood’s sales and customer relationships in jeopardy. “We’re not a paper or plastics company where you can deliver a load a day late,” said Stern. “We’re a meat and produce company, so late deliveries are a big deal. We’re in the business to make our customers happy and make sure they’re getting their products on time.” Sherwood has partnered with Fr8Hub, an online marketplace dedicated to cross-border trucking and distribution within Mexico, to speed northbound freight from Laredo, and is discussing giving the logistics technology provider a greater role in managing cross-border shipments. “We want them to handle the freight from origin in Mexico to destination,” said Stern. “We don’t want to have the problem of not knowing when that freight will cross the border, get inspected, and then be ready for us. The biggest problem for us is not knowing where that freight is.” Shining light on a ‘black hole’ That problem is drawing more attention and expertise to the US-Mexico border, as companies ranging from third-party logistics operators such as C.H. Robinson, GlobalTranz, and Sunset Transportation to technology startups Fr8Hub and Forager race to develop solutions. Sunset Transportation, a St. Louis-based third-party logistics (3PL) company, added warehouse and office space in Laredo, and Nuevo Laredo, Mexico, in September to provide northbound and southbound visibility to shippers, according to managing director Jose Minarro. “Shippers feel like they lose control when shipping southbound,” said Minarro, who joined Sunset in July after 11 years at Transplace Mexico. Sherwood’s problem points to two different types of visibility on the border. One involves knowing exactly where a truck is at any time, a problem usually solved with global positioning satellite (GPS) technology. The other is knowing where a shipment is in terms of process. For example, knowing whether a shipment has been transferred to a drayage driver, or passed a customs inspection, or arrived at a warehouse and is ready for pickup. Knowing the physical location of a truck doesn’t always tell you where a shipment is in that multi-step process. Border delays were one factor leading Covenant Transport Services to end service into Mexico. “Our drivers experience major delays at the borders, with long transloading and inspection times,” Andy Vanzant, senior vice president of highway services, said in an e-mail. “These delays have negatively impacted our business and created driver-unfriendly conditions,” Vanzant said. He also referenced low spot market prices within Mexico and difficulty building freight density. Covenant still serves the Laredo and El Paso, Texas, gateways, he said. Current delays are less about congestion of the type that clogged the US-Mexico border with truck traffic in April, and more about miscommunication, or a lack of communication. That can stop a truck as surely as a five-mile backup into a customs inspection station. “It’s about understanding the actual process of moving the load across the border,” said Matt Silver, co-founder and CEO of Forager. “A customer may ship 5 to 10 percent of their freight cross-border but spend 15 to 20 percent of their time dealing with it. It doesn’t balance out.” Infrastructure ‘pain point’ Domestic US shipping is comparatively straightforward, he said. “If you’re shipping a load of beer from Dallas to Denver, the carrier is going to pick it up, deliver it, send you an invoice, and that’s the end of it. In a Mexican load, you’ve got anywhere from five to 10 partners involved.” That includes two to three carriers, warehouse operators, and customs inspectors. “You have all these different things going on all at the same time,” said Silver. “Getting updates for the customer is a very basic function of any freight company, but it’s a lot of what we do now.” Wherever a shipment is involved in a complex exchange — at the US border, at a seaport terminal, and even a less-than-truckload (LTL) crossdock — involving a series of steps within an overall transaction or process, there’s opportunity to lose track of that shipment. That “black hole” for freight visibility threatens to expand as northbound freight volumes rise and move through an increasingly narrow funnel: 88 truck lanes at 20 US border crossings from Otay Mesa in San Diego, California, to Brownsville on the Texas Gulf Coast. “Infrastructure is a pain point,” said Ohad Axelrod, co-founder and CEO of Fr8Hub. “You look at the roads leading to the border from Monterrey, and some of these sections are pretty horrible to drive.” The more freight is moved, the worse the situation is likely to get, he said. The number of trucks crossing from Mexico into the US increased 2.5 percent in the first half of 2019 to just over 3.2 million, despite a 3.5 percent year-over-year drop in northbound traffic in April, when US Customs and Border Protection (CBP) effectively shut down many truck crossing lanes. US-bound volumes bounced back in May, rising 2.7 percent, according to the US Bureau of Transportation Statistics. Traffic then settled in June, climbing only 0.8 percent from a year earlier. The value of US-Mexico freight carried by truck dropped 1 percent in June, as exports fell. The BTS doesn’t track southbound shipments, but there are far fewer of them. The ratio of northbound to southbound freight has been reported as two loads to one, and even three loads to one or higher during the peak Mexican produce season, creating a border imbalance. That imbalance is “getting more and more problematic,” Axelrod said. “If we give [a Mexican carrier] two southbounds, they’ll be happy to give us 10 loads going northbound. We need to leverage that supply and demand more smartly as much as possible.” Contact William B. Cassidy at bill.cassidy@ihsmarkit.com and follow him on Twitter: @willbcassidy .

Trucking News

Lack of visibility delays US-Mexico truck freight

<div class="phx-topic abstract-wrapper">The three liners saw their first-quarter revenues come in between 9% and 21% lower than last year amid sharply softer rates on the key Asia-US and Asia-Europe trades. </div>

The three liners saw their first-quarter revenues come in between 9% and 21% lower than last year amid sharply softer rates on the key Asia-US and Asia-Europe trades.

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<div class="phx-topic">Taiwan's “Big Three” container lines all posted lower operating revenues in the first quarter amid the year-over-year decline in freight rates. Evergreen Marine, the largest of the trio, recorded the steepest decline, with revenues falling 21% to $2.7 billion between January and March compared with a $3.5 billion a year earlier, filings to the Taiwan stock exchange showed. The figures reflected the Q1 2025 mini-peak in freight rates that was bolstered by strong cargo volumes, something that was absent in this year’s first quarter. Evergreen has not yet disclosed its average rate per TEU or volumes for the first quarter, but rates on Asia-US and Asia-Europe trades, both key markets for the carrier, saw significant double-digit year-over-year declines in January and February. <div class="wrapper-narrow"><dynamic-object type="jocchartid" resource-id="a2606c91-b30c-4219-b617-9491b44b6af1"></dynamic-object></div>Rates on Asia-US services were down more than 50% in January and about 25% in February before recovering in March, according to data from the Shanghai Shipping Exchange carried on the Journal of Commerce Gateway platform. There was a similar decline on Asia-Europe freight rates in the January-February period before an uptick in March, SSE data shows. Evergreen’s monthly revenue figures remain mixed this year. While revenues were down significantly in March at $872 million compared with $1 billion in January, the year-on-year decline eased over the first quarter, from 25% in January to 18% in March. <h3>Yang Ming Q1 revenue down 15% </h3>Yang Ming Marine Transport, Taiwan’s second-largest carrier, saw similar declines with revenue dropping 15% to $1.2 billion in the first quarter. The pace of decline also eased in the quarter, from a 22% year-over-year drop in January to 6% in March. Highlighting the impact of falling freight rates, Yang Ming said average revenue per TEU fell to around $900 from more than $1,300 in the first quarter last year. Intra-Asia focused Wan Hai Lines, meanwhile, saw first-quarter revenue slide 9% to $1 billion. The carrier said while intra-Asia freight rates have held steady, averaging around $500 per TEU, rates on its US services showed a significant decline year over year, from about $1,800/TEU in the first quarter last year to roughly $1,200/TEU this year. Rates on its South America services also eased to around $1,000/TEU from about $1,300/TEU. Contact Keith Wallis at <a href="mailto:keithwallis@hotmail.com">keithwallis@hotmail.com</a>. </div>

Taiwan's “Big Three” container lines all posted lower operating revenues in the first quarter amid the year-over-year decline in freight rates. Evergreen Marine, the largest of the trio, recorded the steepest decline, with revenues falling 21% to $2.7 billion between January and March compared with a $3.5 billion a year earlier, filings to the Taiwan stock exchange showed. The figures reflected the Q1 2025 mini-peak in freight rates that was bolstered by strong cargo volumes, something that was absent in this year’s first quarter. Evergreen has not yet disclosed its average rate per TEU or volumes for the first quarter, but rates on Asia-US and Asia-Europe trades, both key markets for the carrier, saw significant double-digit year-over-year declines in January and February. Rates on Asia-US services were down more than 50% in January and about 25% in February before recovering in March, according to data from the Shanghai Shipping Exchange carried on the Journal of Commerce Gateway platform. There was a similar decline on Asia-Europe freight rates in the January-February period before an uptick in March, SSE data shows. Evergreen’s monthly revenue figures remain mixed this year. While revenues were down significantly in March at $872 million compared with $1 billion in January, the year-on-year decline eased over the first quarter, from 25% in January to 18% in March. Yang Ming Q1 revenue down 15% Yang Ming Marine Transport, Taiwan’s second-largest carrier, saw similar declines with revenue dropping 15% to $1.2 billion in the first quarter. The pace of decline also eased in the quarter, from a 22% year-over-year drop in January to 6% in March. Highlighting the impact of falling freight rates, Yang Ming said average revenue per TEU fell to around $900 from more than $1,300 in the first quarter last year. Intra-Asia focused Wan Hai Lines, meanwhile, saw first-quarter revenue slide 9% to $1 billion. The carrier said while intra-Asia freight rates have held steady, averaging around $500 per TEU, rates on its US services showed a significant decline year over year, from about $1,800/TEU in the first quarter last year to roughly $1,200/TEU this year. Rates on its South America services also eased to around $1,000/TEU from about $1,300/TEU. Contact Keith Wallis at keithwallis@hotmail.com .

Maritime

Container lines

Asia-Europe

Container Shipping News

Lower freight rates hit Q1 revenues for Taiwan’s ‘Big Three’ carriers

<div class="phx-topic abstract-wrapper">Local BCOs are adopting a wait-and-watch strategy until there is greater clarity regarding cargo insurance costs and vessel passage through the Strait of Hormuz before committing to contract deals with carrier partners, sources say. </div>

Local BCOs are adopting a wait-and-watch strategy until there is greater clarity regarding cargo insurance costs and vessel passage through the Strait of Hormuz before committing to contract deals with carrier partners, sources say.

<div class="phx-topic">Annual service contract negotiations on Indian westbound trades to the US for the 2026-27 year have thus far featured an unusually cautious approach by both ocean carriers and beneficial cargo owners (BCOs) amid uncertainty caused by the war in the Middle East, industry sources say. Contracts typically being May 1 and run through the following April. “The contract season is starting with more flexible structures, shorter validity and increased interest in indexed or hybrid pricing models,” said Ashish Sheth, chairman and managing director of Sarjak Container Lines. “From a market standpoint, this could signal an inflection point where freight derivatives and index-linked contracts gain more traction and traditional annual contracting gives way to dynamic, risk-adjusted pricing strategies.” Amid massive trade volatility, most carriers are limiting new long-term contract deals to global BCOs who have consistently met their minimum quantity commitments (MQCs), according to multiple sources with knowledge of the matter. Local BCOs, meanwhile, are being offered “floating” price contracts in most cases. For India–US East Coast (USEC) shipper clients, floating contract prices are generally lower than the freight-all-kinds (FAK) accounts by between $150 to $300 per FEU, sources said. Theoretically, floating contracts allow carriers to adjust rates over time in line with the market reality. Hapag-Lloyd, Mediterranean Shipping Co. (MSC) and CMA CGM are among major carriers considering more floating rate contracts in the current distorted market environment, according to multiple sources with knowledge of the matter. Hapag-Lloyd is also said to be downplaying named account contract commitments — where the customers are typically listed — as part of a tweaked strategy, the sources said. The German liner, which recently <a href="https://www.joc.com/article/hapag-lloyd-to-invest-1-billion-across-indian-maritime-verticals-6189463">unveiled a $1 billion investment program for India</a> to cement its footprint in the country, commands the largest market share out of western India (Nhava Sheva/Mundra) for trades into the USEC, which is outside the Gemini Cooperation framework. “Basically, the carriers want to structure a contract that’s then subject to a general rate increase and/or a peak season surcharge, but BCOs are unwilling to go along with such open clauses,” said a forwarder executive who didn’t want to be identified. Sources also said there are indications that Maersk wants to engage in shorter-term, three-month rate contracts with local BCOs instead of annual contracts. Efforts to seek official comment from major carriers, including Maersk and Hapag-Lloyd, were unsuccessful. <h3>BCOs seek clarity </h3>Local BCOs are adopting a wait-and-watch strategy until there is greater clarity regarding cargo insurance costs and vessel passage through the Strait of Hormuz before committing to contract deals with carrier partners. “We have decided to hold off for now [on contract talks],” said a supply chain executive at a Mumbai-based diversified conglomerate who didn’t want to be identified. “We do not want to lock ourselves into rates at the levels being indicated now.” <div class="wrapper-narrow"><dynamic-object type="jocchartid" resource-id="893ffa5c-0a69-45c7-a555-425e44318711"></dynamic-object></div>Meanwhile, with little demand support and more regular weekly sailings, India–USEC carriers have canceled rate hike plans previously scheduled for April, pushing FAK rates on the trade lane down by up to $500 over the past two weeks. FAK rates now stand at between $2,200 to $2,500 per FEU for European liners and around $2,100 for Asian operators, industry data shows. Platts, a sister company of the Journal of Commerce within S&amp;P Global, put India–USEC spot rates at $2,450 per FEU as of April 13, essentially unchanged on the week. Contact Bency Mathew at <a href="mailto:bencyvmathew@gmail.com">bencyvmathew@gmail.com.</a></div>

Annual service contract negotiations on Indian westbound trades to the US for the 2026-27 year have thus far featured an unusually cautious approach by both ocean carriers and beneficial cargo owners (BCOs) amid uncertainty caused by the war in the Middle East, industry sources say. Contracts typically being May 1 and run through the following April. “The contract season is starting with more flexible structures, shorter validity and increased interest in indexed or hybrid pricing models,” said Ashish Sheth, chairman and managing director of Sarjak Container Lines. “From a market standpoint, this could signal an inflection point where freight derivatives and index-linked contracts gain more traction and traditional annual contracting gives way to dynamic, risk-adjusted pricing strategies.” Amid massive trade volatility, most carriers are limiting new long-term contract deals to global BCOs who have consistently met their minimum quantity commitments (MQCs), according to multiple sources with knowledge of the matter. Local BCOs, meanwhile, are being offered “floating” price contracts in most cases. For India–US East Coast (USEC) shipper clients, floating contract prices are generally lower than the freight-all-kinds (FAK) accounts by between $150 to $300 per FEU, sources said. Theoretically, floating contracts allow carriers to adjust rates over time in line with the market reality. Hapag-Lloyd, Mediterranean Shipping Co. (MSC) and CMA CGM are among major carriers considering more floating rate contracts in the current distorted market environment, according to multiple sources with knowledge of the matter. Hapag-Lloyd is also said to be downplaying named account contract commitments — where the customers are typically listed — as part of a tweaked strategy, the sources said. The German liner, which recently unveiled a $1 billion investment program for India to cement its footprint in the country, commands the largest market share out of western India (Nhava Sheva/Mundra) for trades into the USEC, which is outside the Gemini Cooperation framework. “Basically, the carriers want to structure a contract that’s then subject to a general rate increase and/or a peak season surcharge, but BCOs are unwilling to go along with such open clauses,” said a forwarder executive who didn’t want to be identified. Sources also said there are indications that Maersk wants to engage in shorter-term, three-month rate contracts with local BCOs instead of annual contracts. Efforts to seek official comment from major carriers, including Maersk and Hapag-Lloyd, were unsuccessful. BCOs seek clarity Local BCOs are adopting a wait-and-watch strategy until there is greater clarity regarding cargo insurance costs and vessel passage through the Strait of Hormuz before committing to contract deals with carrier partners. “We have decided to hold off for now [on contract talks],” said a supply chain executive at a Mumbai-based diversified conglomerate who didn’t want to be identified. “We do not want to lock ourselves into rates at the levels being indicated now.” Meanwhile, with little demand support and more regular weekly sailings, India–USEC carriers have canceled rate hike plans previously scheduled for April, pushing FAK rates on the trade lane down by up to $500 over the past two weeks. FAK rates now stand at between $2,200 to $2,500 per FEU for European liners and around $2,100 for Asian operators, industry data shows. Platts, a sister company of the Journal of Commerce within S&P Global, put India–USEC spot rates at $2,450 per FEU as of April 13, essentially unchanged on the week. Contact Bency Mathew at bencyvmathew@gmail.com.

Middle East-linked market ambiguity clouds India-US service contract plans

<div class="phx-topic abstract-wrapper">The customs agency will prioritize unliquidated entries in the first phase of the refund process that was instigated by the February Supreme Court decision to invalidate tariffs on most US trading partners.</div>

The customs agency will prioritize unliquidated entries in the first phase of the refund process that was instigated by the February Supreme Court decision to invalidate tariffs on most US trading partners.

<div class="phx-topic">Refunds of tariffs paid under the International Emergency Economic Powers Act (IEEPA) will start April 20 under a phased rollout, according to US Customs and Border Protection (CBP). The <a href="https://www.joc.com/article/cbp-lays-out-initial-tariff-refund-plan-that-requires-minimal-work-from-importers-6183418">refund process</a>, which will come as welcome news to importers, is being managed through a new tool, called Consolidated Administration and Processing of Entries (CAPE), that is being built within CBP’s Automated Commercial Environment Secure Data Portal (ACE Portal). The <a href="https://www.joc.com/article/us-supreme-court-rules-against-trump-in-critical-ieepa-tariff-case-6173568">US Supreme Court ruled on Feb. 20</a> that the Trump administration improperly used IEEPA to justify widespread tariffs the US slapped on virtually all of its trading partners beginning in the spring of 2025. That decision shifted details on the refund process to the US Court of International Trade, which instructed CBP to avoid delaying refunds to US importers that had collectively paid more than $150 billion in IEEPA tariffs. The first phase of the refund process prioritizes so-called unliquidated entries and liquidated entries that are fewer than 80 days old. A liquidated entry means CBP has completed the final assessment of duties, taxes and fees, making the entry legal and closed. CBP has said that the refund process will take up to 45 days once a CAPE declaration has been filed, but the agency has issued no formal timeline for when refunds might actually land in the accounts of importers. To apply for IEEPA tariff refunds, importers must either have an ACE portal account or an automated clearing house (ACH) account so they can receive the refunds. Customs experts have advised importers to set up both to avoid delays in the refund process. If a customs broker or other third party is authorized by an importer to act as a notify party on a customs entry, and if the broker is set up to receive refunds electronically, that party can receive refunds via ACH on behalf of an importer. Contact Eric Johnson at <a href="mailto:eric.johnson@spglobal.com">eric.johnson@spglobal.com</a>. </div>

Refunds of tariffs paid under the International Emergency Economic Powers Act (IEEPA) will start April 20 under a phased rollout, according to US Customs and Border Protection (CBP). The refund process , which will come as welcome news to importers, is being managed through a new tool, called Consolidated Administration and Processing of Entries (CAPE), that is being built within CBP’s Automated Commercial Environment Secure Data Portal (ACE Portal). The US Supreme Court ruled on Feb. 20 that the Trump administration improperly used IEEPA to justify widespread tariffs the US slapped on virtually all of its trading partners beginning in the spring of 2025. That decision shifted details on the refund process to the US Court of International Trade, which instructed CBP to avoid delaying refunds to US importers that had collectively paid more than $150 billion in IEEPA tariffs. The first phase of the refund process prioritizes so-called unliquidated entries and liquidated entries that are fewer than 80 days old. A liquidated entry means CBP has completed the final assessment of duties, taxes and fees, making the entry legal and closed. CBP has said that the refund process will take up to 45 days once a CAPE declaration has been filed, but the agency has issued no formal timeline for when refunds might actually land in the accounts of importers. To apply for IEEPA tariff refunds, importers must either have an ACE portal account or an automated clearing house (ACH) account so they can receive the refunds. Customs experts have advised importers to set up both to avoid delays in the refund process. If a customs broker or other third party is authorized by an importer to act as a notify party on a customs entry, and if the broker is set up to receive refunds electronically, that party can receive refunds via ACH on behalf of an importer. Contact Eric Johnson at eric.johnson@spglobal.com .

Transport, Trade and Regulation News

Supply chain

First wave of IEEPA refunds to US importers to start April 20: CBP

<div class="phx-topic abstract-wrapper">The doubling in bunker fuel prices in some key hubs since the war in the Middle East began six weeks ago is focusing industry attention on energy costs as supply scarcity worsens.</div>

The doubling in bunker fuel prices in some key hubs since the war in the Middle East began six weeks ago is focusing industry attention on energy costs as supply scarcity worsens.

<div class="phx-topic">Elevated energy prices due to the war in Iran are complicating, and in some cases slowing, some annual trans-Pacific service contract negotiations between container lines and US importers as emergency fees push up container spot rates. Bunker fuel prices, which doubled in many key hubs in the days after the war in the Middle East began disrupting oil supply six weeks ago, have focused shippers’ attention on how the higher carrier operating costs will be passed onto them via bunker adjustment factors (BAFs) and emergency bunker fuel surcharges. Container lines can give few assurances on the limits to the higher costs their customers face as shipowners scramble to secure fuel supplies for May and June amid worsening scarcity. Still, there is little concern that the increased attention on the fuel component of freight rates will derail finalizing 2026–27 service contracts, which typically go in effect May 1. The last time attention to fuel — which is generally treated as a simple pass-through cost within contracts — complicated contract talks was in 2019, ahead of impending low-sulfur regulations. This year, the impact of the war has helped carriers secure higher rates than last year, even when fuel was excluded, two container line executives said. Unlike in past years when negotiated contract rates slipped in early March, one of the carrier executives noted his pricing power increased as the impact of the war widened. The war began on Feb. 28. But increased annual costs from labor, port tariffs and landside transport make most of the contract rate gains a wash compared with rate levels secured last year, the two executives said. Container spot rates, as measured by various indexes, have been rising steadily since late February and early March before ascending even higher in early April. Emergency fuel surcharges began taking effect in the first week of April, following a 30-day review by maritime regulators. The cost to ship an FEU from Shanghai to Los Angeles hit $2,910 in the week ending April 9, a $900 increase from six weeks prior, according to Drewry’s World Container Index. <h3>Higher pass-on costs </h3>Container lines have imperfect means to recoup higher fuel costs and the additional costs accrued through disruption. BAFs can lag up to 90 days, hampering carriers’ cash flow in the meantime. US maritime regulators have prevented carriers from immediately implementing emergency surcharges, <a href="https://www.joc.com/article/fmc-again-rejects-maersk-petition-to-waive-notice-period-for-emergency-fuel-surcharge-6199261">forcing them to adhere to the 30-day notice period</a>, as required by US shipping law. The war has had minimal direct impact on container shipping, affecting just 1% to 2% of the total global capacity that typically transits the Strait of Hormuz. But the growing scarcity of bunker fuel in Asia has forced some ships to alter routings to refuel at alternative hubs, thus burning more fuel and accruing higher operating costs, a third carrier executive said. The rejection by Chinese authorities of emergency bunker fuel surcharges has further complicated efforts by carriers to recoup higher costs from exporters in China. The severity of emergency surcharges varies by carrier, but all are easily in the hundreds of dollars to ship an FEU from Asia to the US West Coast. US importers shipping contracted cargo can also be subject to emergency bunker fuel surcharges even if language within their contract restricts such fees. That is prompting discussions during contract negotiations about just how much exposure cargo owners face from future fees. Shippers and forwarders are also trying to resist attempts by some carriers to calculate BAFs on a monthly rather than quarterly basis. “I can’t mask my frustration about this. The fuel charge in the contract becomes nothing more than a glorified [freight-all-kinds] rate,” a forwarder told the Journal of Commerce. “It nullifies our ability to get longer-term rates for purposes of stability and visibility.” <h3>War volatility outstrips BAF </h3>A fourth carrier executive explained that the BAF was a “pre-war mechanism” that worked well when bunker fuel prices were relatively stable. But the recent surge in oil prices since March is adding literally <a href="https://www.joc.com/article/war-adding-40-50-million-per-week-to-hapag-lloyds-costs-ceo-6193532">millions of dollars a week to carriers’ costs</a>. “When oil prices come back down — whenever that is — I don’t think anyone thinks that the price [of bunker fuel] will stay like this,” the carrier source said. “The rate will go back down to the pre-war rate.” The second-quarter BAF shouldn’t be too onerous for most shippers since it will mostly reflect the far less volatile January and February fuel prices, said Jason Cook, chief executive of Ardent Global Logistics. A sustained period of higher fuel prices through March and into the second quarter, however, will mean much higher BAF charges are coming in the third quarter. Shippers may try to frontload third-quarter cargo throughout May and June to avoid paying the higher BAF, he said. “For the second quarter, the BAF should be pretty mild,” Cook said. “It won’t really show up until the third quarter.” Contact Mark Szakonyi at <a href="mailto:mark.szakonyi@spglobal.com">mark.szakonyi@spglobal.com</a>. Senior editors Michael Angell and Bill Mongelluzzo contributed to this report. </div>

Elevated energy prices due to the war in Iran are complicating, and in some cases slowing, some annual trans-Pacific service contract negotiations between container lines and US importers as emergency fees push up container spot rates. Bunker fuel prices, which doubled in many key hubs in the days after the war in the Middle East began disrupting oil supply six weeks ago, have focused shippers’ attention on how the higher carrier operating costs will be passed onto them via bunker adjustment factors (BAFs) and emergency bunker fuel surcharges. Container lines can give few assurances on the limits to the higher costs their customers face as shipowners scramble to secure fuel supplies for May and June amid worsening scarcity. Still, there is little concern that the increased attention on the fuel component of freight rates will derail finalizing 2026–27 service contracts, which typically go in effect May 1. The last time attention to fuel — which is generally treated as a simple pass-through cost within contracts — complicated contract talks was in 2019, ahead of impending low-sulfur regulations. This year, the impact of the war has helped carriers secure higher rates than last year, even when fuel was excluded, two container line executives said. Unlike in past years when negotiated contract rates slipped in early March, one of the carrier executives noted his pricing power increased as the impact of the war widened. The war began on Feb. 28. But increased annual costs from labor, port tariffs and landside transport make most of the contract rate gains a wash compared with rate levels secured last year, the two executives said. Container spot rates, as measured by various indexes, have been rising steadily since late February and early March before ascending even higher in early April. Emergency fuel surcharges began taking effect in the first week of April, following a 30-day review by maritime regulators. The cost to ship an FEU from Shanghai to Los Angeles hit $2,910 in the week ending April 9, a $900 increase from six weeks prior, according to Drewry’s World Container Index. Higher pass-on costs Container lines have imperfect means to recoup higher fuel costs and the additional costs accrued through disruption. BAFs can lag up to 90 days, hampering carriers’ cash flow in the meantime. US maritime regulators have prevented carriers from immediately implementing emergency surcharges, forcing them to adhere to the 30-day notice period , as required by US shipping law. The war has had minimal direct impact on container shipping, affecting just 1% to 2% of the total global capacity that typically transits the Strait of Hormuz. But the growing scarcity of bunker fuel in Asia has forced some ships to alter routings to refuel at alternative hubs, thus burning more fuel and accruing higher operating costs, a third carrier executive said. The rejection by Chinese authorities of emergency bunker fuel surcharges has further complicated efforts by carriers to recoup higher costs from exporters in China. The severity of emergency surcharges varies by carrier, but all are easily in the hundreds of dollars to ship an FEU from Asia to the US West Coast. US importers shipping contracted cargo can also be subject to emergency bunker fuel surcharges even if language within their contract restricts such fees. That is prompting discussions during contract negotiations about just how much exposure cargo owners face from future fees. Shippers and forwarders are also trying to resist attempts by some carriers to calculate BAFs on a monthly rather than quarterly basis. “I can’t mask my frustration about this. The fuel charge in the contract becomes nothing more than a glorified [freight-all-kinds] rate,” a forwarder told the Journal of Commerce. “It nullifies our ability to get longer-term rates for purposes of stability and visibility.” War volatility outstrips BAF A fourth carrier executive explained that the BAF was a “pre-war mechanism” that worked well when bunker fuel prices were relatively stable. But the recent surge in oil prices since March is adding literally millions of dollars a week to carriers’ costs . “When oil prices come back down — whenever that is — I don’t think anyone thinks that the price [of bunker fuel] will stay like this,” the carrier source said. “The rate will go back down to the pre-war rate.” The second-quarter BAF shouldn’t be too onerous for most shippers since it will mostly reflect the far less volatile January and February fuel prices, said Jason Cook, chief executive of Ardent Global Logistics. A sustained period of higher fuel prices through March and into the second quarter, however, will mean much higher BAF charges are coming in the third quarter. Shippers may try to frontload third-quarter cargo throughout May and June to avoid paying the higher BAF, he said. “For the second quarter, the BAF should be pretty mild,” Cook said. “It won’t really show up until the third quarter.” Contact Mark Szakonyi at  mark.szakonyi@spglobal.com . Senior editors Michael Angell and Bill Mongelluzzo contributed to this report.

Forwarding

Trans-Pacific

War-driven fuel costs add new twist to trans-Pacific service contract talks

<div class="phx-topic abstract-wrapper">While the $4.2 billion transaction still requires approvals from the Israeli government, it points to an appetite for consolidation among carriers despite the lack of financial distress that accompanied earlier merger eras. </div>

While the $4.2 billion transaction still requires approvals from the Israeli government, it points to an appetite for consolidation among carriers despite the lack of financial distress that accompanied earlier merger eras.

<div class="phx-topic">Could another round of container shipping consolidation be approaching? Hapag-Lloyd’s planned $4.2 billion acquisition of Zim Integrated Shipping Services, announced in February, shows a growing appetite among carriers for scale, including through consolidation, despite the lack of financial hardship that drove earlier rounds of industry mergers and aquisitions. The risk of falling behind is acute. No. 1 carrier Mediterranean Shipping Co., at 21.6% of the global fleet by capacity following a massive expansion since the pandemic, is now more than three times the size of No. 5 Hapag-Lloyd and No. 6 Ocean Network Express (ONE), according to Alphaliner rankings. MSC has accounted for 33.6% of total container carrier fleet growth since 2000, according to the analyst. As a result, midsize carriers — even those firmly within the top 10 — are realizing the urgency of building scale to remain competitive with the top carriers, pursuing that goal by aggressively acquiring tonnage and potentially considering the possibility of once unthinkable M&amp;A. <div class="wrapper-narrow float-right-element"><img src="/images/phoenix/6202639_0.1.jpg"></img></div>“With post-COVID and the outsized profits from that time period, you are seeing carriers focus on a ‘core’ or ‘integrator’ strategy, but in both cases, scale is still key,” Brian Nemeth, global co-leader of logistics and transportation at Alix Partners, told the Journal of Commerce. A “core” strategy would be a focus on ocean shipping and terminals while “integrator” refers to end-to-end activities including origin consolidation, warehousing, last-mile and visibility. With fewer large carriers remaining — the top 10 control more than 85% percent of the fleet today versus 48% in 1996, according to analyst Lars Jensen — merger opportunities are harder to find, although any further deals would continue a longstanding industry trend. “The liner shipping industry has seen a persistent drive towards consolidation for more than 30 years,” Jensen wrote in his book Liner Shipping 2025, published in 2017. While the Zim deal still requires approvals from the Israeli government, the fact Hapag-Lloyd was able to overcome national security and other obstacles in signing the merger agreement shows that deals some might have regarded as impossible may in fact be within reach. “I was somewhat surprised that Zim would do a deal like Hapag, for many reasons including cultural differences, but also from the point of view of Israeli national security,” consultant and former senior Maersk executive Robbert van Trooijen told the Journal of Commerce. “The fact they found a solution to this, assuming [the deal closes], they have proven there are solutions to be found,” he said. <h3>The vulnerability of midsize carriers </h3>For example, would Japan ever allow Ocean Network Express (ONE), which consolidated its three largest ocean carriers in 2017, to be merged into a larger combined carrier? As important as the trade-dependent nation views shipping, some believe ONE is sub-scale in the current environment, a point that could apply to several other Asian carriers. A deal to privatize South Korea’s HMM <a href="https://www.joc.com/article/hmms-48-billion-share-sale-is-scrapped-over-management-control-issue-5215009">collapsed in 2024</a> but could one day be revived. “Assume in the next three to five years the industry, which has an unprecedented order book of 35% of the global existing fleet, enters a downturn,” van Trooijen said. “There must be a moment where the 1-2 million TEU players start asking themselves, ‘where do we see ourselves 10 years from now?’” The record 35% order book as a percentage of the existing fleet by itself illustrates top carriers’ aggressive pursuit of scale. As of December, the top 10 carriers controlled 79% of the order book, although the actual figure is likely near 85% when expected long-term charters are figured in, according to Alphaliner chief analyst Jan Tiedemann. Under its “2030 Strategy” unveiled in 2024, ONE aims to increase its capacity to 3 million TEUs, a 42% increase from its current fleet size. In March, <a href="https://www.joc.com/article/one-boosts-ownership-stake-in-seaspan-parent-poseidon-6184045">it increased its stake to 48.9% in the parent company of Seaspan</a>, the largest non-operating owner of container ships. HMM in its own 2030 strategy plan also aims to double its fleet size. Increasing the vulnerability of midsize carriers is the possibility the alliances they participate in break up, leaving them at the mercy of larger carriers to expand market coverage beyond what their own fleet capacity can provide. “Hapag-Lloyd leaving its prior alliance to join up with Maersk shows you can’t always depend on stable alliances,” van Trooijen said, observing an emerging disconnect between smaller carriers’ aggressive vessel orders in pursuit of scale and their underlying commercial ability to fill the ships. “In other words [in the event their alliance breaks up], the smaller players run the risk of being left out in the cold where they have big ships but don’t have scale to support that,” he added. “That could very well happen.” <h3>Carriers in good position to withstand downturn </h3>That is further reason why the Hapag/Zim deal, coming at a time when carriers remain flush with cash from the pandemic and thus, according to some, are well-prepared to weather any downturn associated with the high order book, may represent a turning point. “When we look at the industry and when we look at this downturn which we are talking about, I think the industry is very well-prepared,” S&amp;P Global analyst Rahul Kapoor told TPM26 in March. Indeed, according to Alix Partners, the Hapag/Zim deal was announced amid a strong financial phase for the industry, a change from the prior consolidation wave culminating in 2016 and 2017 when the industry was on much shakier ground financially, illustrated by the Hanjin bankruptcy in August 2016. <div class="wrapper-narrow"><dynamic-object type="jocchartid" resource-id="6f095f56-8498-498c-b802-0e167eafd666"></dynamic-object></div>For the container shipping industry, Alix’s “Altman Z” score, which measures the likelihood of bankruptcy (the lower the number, the greater the risk), was 1.19 in 2016. That was the year of the Hanjin bankruptcy, the Cosco/China Shipping merger, CMA CGM’s acquisition of APL, Maersk announcing plans to buy Hamburg Sud, and key milestones in the Hapag-Lloyd/United Arab Shipping merger that was finalized in 2017. By 2025, it was more than twice as high, indicating much greater financial health, the Alix data shows. Van Trooijen believes there exists a window for carriers to engage in consolidation deals while they are financially robust in order to address the structural inequities before they become increasingly apparent As he <a href="https://www.joc.com/article/in-wake-of-zim-deal-the-time-for-industry-consolidation-is-now-6179297">wrote on JOC.com recently</a>: “The container shipping industry stands at a pivotal moment. Record fleet expansion, widening scale disparities, and lingering financial reserves combine to create a rare window in which transformative deals are both feasible and strategically rational.” Contact Peter Tirschwell at <a href="mailto:peter.tirschwell@spglobal.com">peter.tirschwell@spglobal.com</a>. </div>

Could another round of container shipping consolidation be approaching? Hapag-Lloyd’s planned $4.2 billion acquisition of Zim Integrated Shipping Services, announced in February, shows a growing appetite among carriers for scale, including through consolidation, despite the lack of financial hardship that drove earlier rounds of industry mergers and aquisitions. The risk of falling behind is acute. No. 1 carrier Mediterranean Shipping Co., at 21.6% of the global fleet by capacity following a massive expansion since the pandemic, is now more than three times the size of No. 5 Hapag-Lloyd and No. 6 Ocean Network Express (ONE), according to Alphaliner rankings. MSC has accounted for 33.6% of total container carrier fleet growth since 2000, according to the analyst. As a result, midsize carriers — even those firmly within the top 10 — are realizing the urgency of building scale to remain competitive with the top carriers, pursuing that goal by aggressively acquiring tonnage and potentially considering the possibility of once unthinkable M&A. “With post-COVID and the outsized profits from that time period, you are seeing carriers focus on a ‘core’ or ‘integrator’ strategy, but in both cases, scale is still key,” Brian Nemeth, global co-leader of logistics and transportation at Alix Partners, told the Journal of Commerce. A “core” strategy would be a focus on ocean shipping and terminals while “integrator” refers to end-to-end activities including origin consolidation, warehousing, last-mile and visibility. With fewer large carriers remaining — the top 10 control more than 85% percent of the fleet today versus 48% in 1996, according to analyst Lars Jensen — merger opportunities are harder to find, although any further deals would continue a longstanding industry trend. “The liner shipping industry has seen a persistent drive towards consolidation for more than 30 years,” Jensen wrote in his book Liner Shipping 2025, published in 2017. While the Zim deal still requires approvals from the Israeli government, the fact Hapag-Lloyd was able to overcome national security and other obstacles in signing the merger agreement shows that deals some might have regarded as impossible may in fact be within reach. “I was somewhat surprised that Zim would do a deal like Hapag, for many reasons including cultural differences, but also from the point of view of Israeli national security,” consultant and former senior Maersk executive Robbert van Trooijen told the Journal of Commerce. “The fact they found a solution to this, assuming [the deal closes], they have proven there are solutions to be found,” he said. The vulnerability of midsize carriers For example, would Japan ever allow Ocean Network Express (ONE), which consolidated its three largest ocean carriers in 2017, to be merged into a larger combined carrier? As important as the trade-dependent nation views shipping, some believe ONE is sub-scale in the current environment, a point that could apply to several other Asian carriers. A deal to privatize South Korea’s HMM collapsed in 2024 but could one day be revived. “Assume in the next three to five years the industry, which has an unprecedented order book of 35% of the global existing fleet, enters a downturn,” van Trooijen said. “There must be a moment where the 1-2 million TEU players start asking themselves, ‘where do we see ourselves 10 years from now?’” The record 35% order book as a percentage of the existing fleet by itself illustrates top carriers’ aggressive pursuit of scale. As of December, the top 10 carriers controlled 79% of the order book, although the actual figure is likely near 85% when expected long-term charters are figured in, according to Alphaliner chief analyst Jan Tiedemann. Under its “2030 Strategy” unveiled in 2024, ONE aims to increase its capacity to 3 million TEUs, a 42% increase from its current fleet size. In March, it increased its stake to 48.9% in the parent company of Seaspan , the largest non-operating owner of container ships. HMM in its own 2030 strategy plan also aims to double its fleet size. Increasing the vulnerability of midsize carriers is the possibility the alliances they participate in break up, leaving them at the mercy of larger carriers to expand market coverage beyond what their own fleet capacity can provide. “Hapag-Lloyd leaving its prior alliance to join up with Maersk shows you can’t always depend on stable alliances,” van Trooijen said, observing an emerging disconnect between smaller carriers’ aggressive vessel orders in pursuit of scale and their underlying commercial ability to fill the ships. “In other words [in the event their alliance breaks up], the smaller players run the risk of being left out in the cold where they have big ships but don’t have scale to support that,” he added. “That could very well happen.” Carriers in good position to withstand downturn That is further reason why the Hapag/Zim deal, coming at a time when carriers remain flush with cash from the pandemic and thus, according to some, are well-prepared to weather any downturn associated with the high order book, may represent a turning point. “When we look at the industry and when we look at this downturn which we are talking about, I think the industry is very well-prepared,” S&P Global analyst Rahul Kapoor told TPM26 in March. Indeed, according to Alix Partners, the Hapag/Zim deal was announced amid a strong financial phase for the industry, a change from the prior consolidation wave culminating in 2016 and 2017 when the industry was on much shakier ground financially, illustrated by the Hanjin bankruptcy in August 2016. For the container shipping industry, Alix’s “Altman Z” score, which measures the likelihood of bankruptcy (the lower the number, the greater the risk), was 1.19 in 2016. That was the year of the Hanjin bankruptcy, the Cosco/China Shipping merger, CMA CGM’s acquisition of APL, Maersk announcing plans to buy Hamburg Sud, and key milestones in the Hapag-Lloyd/United Arab Shipping merger that was finalized in 2017. By 2025, it was more than twice as high, indicating much greater financial health, the Alix data shows. Van Trooijen believes there exists a window for carriers to engage in consolidation deals while they are financially robust in order to address the structural inequities before they become increasingly apparent As he wrote on JOC.com recently : “The container shipping industry stands at a pivotal moment. Record fleet expansion, widening scale disparities, and lingering financial reserves combine to create a rare window in which transformative deals are both feasible and strategically rational.” Contact Peter Tirschwell at peter.tirschwell@spglobal.com .

Hapag-Zim deal could ignite another merger wave in container shipping

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