<div class="phx-topic abstract-wrapper"><p>While there are encouraging signs regarding general merchandise retailers seeing their inventories-to-sales return toward pre-COVID levels, data suggests many sectors have a long way to go before their inventories-to-sales come back to pre-pandemic levels.</p></div>

While there are encouraging signs regarding general merchandise retailers seeing their inventories-to-sales return toward pre-COVID levels, data suggests many sectors have a long way to go before their inventories-to-sales come back to pre-pandemic levels.

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<div><p>The recovery of Trans-Pacific container volumes from Asia to North America will depend, in part, on how quickly importers are able to draw down excess inventories over the coming months.</p><div><img></div><p></p><p>While there are encouraging signs regarding general merchandise retailers seeing their inventories-to-sales return toward pre-COVID levels after <a>spiking</a> on a seasonally adjusted basis in mid-2022, data from the wholesale trade sector for import-centric wholesaling industries suggests many of these sectors have a long way to go before their inventories-to-sales come back to pre-COVID levels.&nbsp;&nbsp;</p><h2>Four sectors to watch&nbsp;</h2><p>Four wholesaling sectors worth monitoring concern wholesaling of furniture and furnishings; household appliances and electrical...

The recovery of Trans-Pacific container volumes from Asia to North America will depend, in part, on how quickly importers are able to draw down excess inventories over the coming months. While there are encouraging signs regarding general merchandise retailers seeing their inventories-to-sales return toward pre-COVID levels after spiking on a seasonally adjusted basis in mid-2022, data from the wholesale trade sector for import-centric wholesaling industries suggests many of these sectors have a long way to go before their inventories-to-sales come back to pre-COVID levels.   Four sectors to watch  Four wholesaling sectors worth monitoring concern wholesaling of furniture and furnishings; household appliances and electrical and electronic goods; hardware and plumbing and heating equipment and supplies; and apparel. All of these wholesale sectors purchase product categories where imports are prevalent, and they are quite large in size.  For example, sales at furniture wholesalers are on par with those of furniture retailers . In a sign of bad news for container carriers, inventories-to-sales ratios for all four sectors are quite elevated from 2019 levels. For example, inventories to sales for apparel wholesalers were about 2 before COVID-19, but this ratio is currently 3, a 50 percent increase. Inventories-to-sales for furniture wholesalers were about 1.7 before COVID-19, but are currently at 2, an approximately 20 percent increase. Inventories-to-sales for household appliance and electrical product wholesalers were about 1.10 before the pandemic, but are about 1.25 today, up 14 percent. Lastly, inventories to sales for hardware and HVAC wholesalers have increased from approximately 2 before COVID-19 to 2.7, a 35 percent increase.   While some of these increases in inventories to sales may be justified given the need to carry more safety inventories to hedge against elevated levels of uncertainty in both demand and lead time, it seems highly likely than many wholesalers in these sectors over-ordered. Consequently, we should expect orders to be curtailed by the desire to right-size inventories.   Some good news  Despite the fact these wholesale sectors currently have elevated inventories-to-sales ratios, the good news is that US Census Bureau data on inflation adjusted wholesale trade sales indicates sales remain robust in each of these sectors. For example, inflation adjusted sales for hardware and HVAC wholesalers are ~5 percent above their 2019 levels, whereas furniture wholesalers are still selling 20 percent more products today than in 2019.   Household appliance and electrical products wholesalers currently have sales 25 percent above their 2019 levels. Apparel wholesalers appear in a weaker position, with demand even with 2019 levels. The fact inflation adjusted sales do not appear poised for sharp declines suggests that these wholesalers, with a few months of constrained ordering, should be able to right the proverbial inventory ship as we move into the second half of 2023.   Excluding apparel, the critical sector to watch in the coming months is single-family starts , as new home construction generates demand for a wide variety of imported products (e.g., small appliances, large appliances, furniture, furnishings, etc.). Further declines in housing activity will prolong the drawdown of excess inventories and, in turn, the recovery of trans-Pacific container volumes.  Contact Jason Miller at  mill2831@broad.msu.edu . 

Industrial Real Estate News

Trans-Pacific

Container Shipping News

Supply chain

US inventory drawdown key to trans-Pacific volume recovery: analyst

<div class="phx-topic abstract-wrapper"><p>The deal is the latest in a growing trend by cash-rich carriers to develop terminals, particularly in Asia and especially in Vietnam, as they move to secure access at key regional ports to gain preferential berthing rights and minimize delays. </p></div>

The deal is the latest in a growing trend by cash-rich carriers to develop terminals, particularly in Asia and especially in Vietnam, as they move to secure access at key regional ports to gain preferential berthing rights and minimize delays.

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<div class="phx-topic"><p>Mediterranean Shipping Co.’s Terminal Investment Limited (TiL) will broaden its network in Vietnam after being chosen as the majority shareholder of a consortium developing the $5 billion Can Gio international container port located south of Ho Chi Minh City. </p><p>The deal is the latest in a growing trend by carriers, supported by recent record profits, to develop terminals, <a href="https://www.joc.com/article/one-adds-to-asian-terminal-holdings-with-laem-chabang-deal-6195250">particularly in Asia and especially in Vietnam</a>, as they move to secure access at key regional ports to gain preferential berthing rights and minimize delays. </p><p>The consortium was selected by the Ho Chi Minh City people's committee this week for a 50-year concession to build and operate the facility, which will mainly target transshipment cargo. TiL will hold a 49% stake in the venture, while state-controlled Vietnam Maritime Corp. (VIMC) will have a 36% shareholding. Saigon Port JSC Corporation will hold the 15% balance. </p><p>The complex, covering 1,412 acres, will have the capacity to handle 4.8 million TEUs by 2030 spread across at least four berths capable of handling 20,000-TEU sized container ships. Plans call for the port to grow to 13 berths handling 17 million TEUs by 2047. Total berth length is almost 5 miles. </p><p>It will be TiL’s second major port project in Vietnam after its Hai Phong Port TiL International Terminal Company inaugurated terminals 3 and 4 at Lach Huyen new port in northern Vietnam a year ago. </p><p>Under the terms of its concession agreement with the Ho Chi Minh City government, TiL and its partners are prevented from selling the Can Gio terminal complex for 10 years and must complete the entire development within 20 years. </p><p>City officials hope the Can Gio port will spur the development of the area as an urban logistics and industrial hub in southern Vietnam, potentially competing with the Cai Mep port and industrial region 12 miles to the northeast. </p><p><i>Contact Keith Wallis at </i><a href="mailto:keithwallis@hotmail.com"><i>keithwallis@hotmail.com</i></a><i>.</i> </p></div>

Mediterranean Shipping Co.’s Terminal Investment Limited (TiL) will broaden its network in Vietnam after being chosen as the majority shareholder of a consortium developing the $5 billion Can Gio international container port located south of Ho Chi Minh City. The deal is the latest in a growing trend by carriers, supported by recent record profits, to develop terminals, particularly in Asia and especially in Vietnam , as they move to secure access at key regional ports to gain preferential berthing rights and minimize delays. The consortium was selected by the Ho Chi Minh City people's committee this week for a 50-year concession to build and operate the facility, which will mainly target transshipment cargo. TiL will hold a 49% stake in the venture, while state-controlled Vietnam Maritime Corp. (VIMC) will have a 36% shareholding. Saigon Port JSC Corporation will hold the 15% balance. The complex, covering 1,412 acres, will have the capacity to handle 4.8 million TEUs by 2030 spread across at least four berths capable of handling 20,000-TEU sized container ships. Plans call for the port to grow to 13 berths handling 17 million TEUs by 2047. Total berth length is almost 5 miles. It will be TiL’s second major port project in Vietnam after its Hai Phong Port TiL International Terminal Company inaugurated terminals 3 and 4 at Lach Huyen new port in northern Vietnam a year ago. Under the terms of its concession agreement with the Ho Chi Minh City government, TiL and its partners are prevented from selling the Can Gio terminal complex for 10 years and must complete the entire development within 20 years. City officials hope the Can Gio port will spur the development of the area as an urban logistics and industrial hub in southern Vietnam, potentially competing with the Cai Mep port and industrial region 12 miles to the northeast. Contact Keith Wallis at keithwallis@hotmail.com .

Port News

Container lines

Port infrastructure

Marine terminals

International ports

Maritime

MSC’s terminals arm extends Vietnam portfolio with new container port project

<div class="phx-topic abstract-wrapper"><p>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. </p></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.

<div class="phx-topic"><p>Taiwan’s “Big Three” container lines all posted lower operating revenues in the first quarter amid the year-over-year decline in freight rates. </p><p>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 $3.5 billion a year earlier, filings to the Taiwan stock exchange showed. </p><p>The figures reflected the first-quarter 2025 mini-peak in freight rates that was bolstered by strong cargo volumes, something that was absent in this year’s first quarter. </p><p>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. </p><div class="wrapper-narrow"><dynamic-object type="jocchartid" resource-id="a2606c91-b30c-4219-b617-9491b44b6af1"></dynamic-object></div><p>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 (SSE) carried on the <i>Journal of Commerce</i> 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. </p><p>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-over-year decline eased over the first quarter, from 25% in January to 18% in March. </p><h3>Yang Ming Q1 revenue down 15% </h3><p>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. </p><p>Highlighting the impact of falling freight rates, Yang Ming said average revenue per TEU fell to about $900 from more than $1,300 in the first quarter last year. </p><p>Intra-Asia-focused Wan Hai Lines, meanwhile, saw first-quarter revenue slide 9% to $1 billion. </p><p>The carrier said while intra-Asia freight rates have held steady, averaging about $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 approximately $1,200/TEU this year. Rates on its South America services also eased to about $1,000/TEU from about $1,300/TEU. </p><p><i>Contact Keith Wallis at </i><a href="mailto:keithwallis@hotmail.com"><i>keithwallis@hotmail.com</i></a><i>.</i> </p></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 $3.5 billion a year earlier, filings to the Taiwan stock exchange showed. The figures reflected the first-quarter 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 (SSE) 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-over-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 about $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 about $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 approximately $1,200/TEU this year. Rates on its South America services also eased to about $1,000/TEU from about $1,300/TEU. Contact Keith Wallis at keithwallis@hotmail.com .

Asia-Europe

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

<div class="phx-topic abstract-wrapper"><p>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. </p></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"><p>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. </p><p>Contracts typically begin May 1 and run through the following April. </p><p>“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.”  </p><p>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.  </p><p>For India-US East Coast (USEC) shipper clients, floating contract prices are generally lower than the freight-all-kinds (FAK) accounts by between $150 and $300 per FEU, sources said. Theoretically, floating contracts allow carriers to adjust rates over time in line with the market reality.  </p><p>Hapag-Lloyd, Mediterranean Shipping Co. 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. </p><p>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. </p><p>“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. </p><p>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.   </p><p>Efforts to seek official comment from major carriers, including Maersk and Hapag-Lloyd, were unsuccessful. </p><h3>BCOs seek clarity </h3><p>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. </p><p>“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.” </p><div class="wrapper-narrow"><dynamic-object type="jocchartid" resource-id="893ffa5c-0a69-45c7-a555-425e44318711"></dynamic-object></div><p>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 and $2,500 per FEU for European liners and about $2,100 for Asian operators, industry data shows. </p><p>Platts, a sister company of the <i>Journal of Commerce</i> within S&amp;P Global, put India-USEC spot rates at $2,450 per FEU as of April 13, essentially unchanged on the week. </p><p><i>Contact Bency Mathew at </i><a href="mailto:bencyvmathew@gmail.com"><i>bencyvmathew@gmail.com</i></a>.</p></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 begin 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 and $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. 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 and $2,500 per FEU for European liners and about $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"><p>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.</p></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"><p>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). </p><p>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). </p><p>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. </p><p>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. </p><p>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. </p><p>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. </p><p>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. </p><p><i>Contact Eric Johnson at </i><a href="mailto:eric.johnson@spglobal.com"><i>eric.johnson@spglobal.com</i></a><i>.</i>    </p></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

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

<div class="phx-topic abstract-wrapper"><p>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.</p></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"><p>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.  </p><p>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.  </p><p>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.  </p><p>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.  </p><p>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.  </p><p>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.   </p><h3>Higher pass-on costs  </h3><p>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.  </p><p>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. </p><p>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.  </p><p>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.  </p><p>Shippers and forwarders are also trying to resist attempts by some carriers to calculate BAFs on a monthly rather than quarterly basis.  </p><p>“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 <i>Journal of Commerce</i>. “It nullifies our ability to get longer-term rates for purposes of stability and visibility.”  </p><h3>War volatility outstrips BAF </h3><p>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>. </p><p>“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.” </p><p>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.  </p><p>Shippers may try to frontload third-quarter cargo throughout May and June to avoid paying the higher BAF, he said.  </p><p>“For the second quarter, the BAF should be pretty mild,” Cook said. “It won’t really show up until the third quarter.” </p><p><i>Contact Mark Szakonyi at </i><a href="mailto:mark.szakonyi@spglobal.com"><i>mark.szakonyi@spglobal.com</i></a><i>.</i> </p><p><i>Senior editors Michael Angell and Bill Mongelluzzo contributed to this report.</i> </p></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.

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