This week:
- Trans-Pacific spot rates fall sharply as import demand spurred by US tariff pause declines
- Air cargo spot rates down year-over-year for the first time in a year amid US tariff uncertainty
- Industry analysts weigh how closing the Strait of Hormuz would impact the global supply chain
- Canada hit with yet another blow to parcel services as DHL Express halts service to the country
Trans-Pacific Shipping Rates Plummet as Demand Due to Tariff Pause Declines
Spot rates in the eastbound trans-Pacific are falling sharply, as analysts say the recent surge in imports driven by a pause in higher US tariffs is now on the decline.
Data analytics firm Platts reported that as of June 17, the spot rate per FEU to the US West Coast had dropped a staggering 32% in a single week to $3,500. Rates to the East Coast saw a less dramatic, but still significant, 11% weekly decline to $6,500 per FEU.
According to Journal of Commerce (JoC) Senior Editor Bill Mongelluzzo and Associate Editor Laura Robb, freight forwarders are reporting even lower numbers, with current rates to the West Coast in the low $3,000s and to the East Coast in the low $6,000s. This marks a swift reversal from early June when West Coast rates were in the low $6,000s and East Coast rates in the low $7,000s.
“It’s quite the turnaround,” Robert Khachatryan, CEO of Freight Right Global Logistics, told the JoC. Khachatryany attributes the decline in spot rates to lower demand.
The initial spike in demand was largely a reaction to the Trump administration’s mid-May decision to pause 145% tariffs on Chinese goods for 90 days. However, demand has fizzled faster than many industry observers expected.
“I think everybody was expecting that big boom to last a lot longer,” one forwarder said to the JoC on the condition of anonymity. “It might be over.”
Tariff Uncertainty Causes Air Cargo Rates to Decline for First Time in a Year
Global air cargo spot rates declined for the first time in a year as the industry grapples with US tariff uncertainty, according to a June report from the market intelligence firm Xeneta.
The global air cargo spot rate fell 4% year-over-year in April to $2.44 per kilogram, marking the first such decline since April 2024.
Xeneta’s analysis attributes the market softness to ongoing US-China trade tensions and the White House’s recent elimination of the de minimis exemption, which previously allowed low-value eCommerce shipments to enter the US duty-free.
The post-de minimis drop in e-commerce volumes from China has created excess air freight capacity, prompting carriers to redeploy aircraft to other parts of Asia. Air cargo spot rates from Northeast Asia (excluding mainland China) to North America have remained more resilient, up 7% year-over-year to $4.53 per kilogram.
While overall rates are declining, the volatile trade environment has experienced some fluctuations. Spot prices on the crucial China-to-U.S. trade lane saw a brief rebound in early June, rising to $4.31 per kilogram. However, industry analysts expect this to be a temporary spike, according to Xeneta’s report.
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What Would Closing the Strait of Hormuz Mean for the Global Supply Chain?
Tehran’s threats to close the Strait of Hormuz, a critical artery for global trade, have ramped up since the US joined Israel in its military exchanges with Iran over the weekend. Many observers and stakeholders are wondering what such a closure would mean for the global supply chain.
Mark Szakonyi, executive editor of the JoC, examined the issue last week and concluded that closing the Strait of Hormuz could severely impact the world’s already strained container shipping capacity and send fuel costs skyrocketing.
If it were to happen, the closure would effectively blockade major regional ports, including Jebel Ali in Dubai and Abu Dhabi’s Khalifa Port, causing supply chain disruptions at least on par with the Red Sea crisis, which is now in its 18th month.
While only 2% to 3% of global container traffic transits the strait, its closure would have an outsized effect, according to Szakonyi.
“A restriction on container traffic through the strait would render deployed tonnage ineffective, putting upward pressure on freight rates and extending transit times,” Szakonyi said. Other industry observers seem to agree.
“If (a closure) happens, it will have a significant impact on container shipping flows to the major transshipment hubs in the region,” Alan Murphy, CEO of Sea-Intelligence Maritime Analysis, wrote in the Sunday Spotlight newsletter.
Canada’s Parcel Woes Continue as DHL Express Halts Service to the Country
As Canada Post and the Canadian Union of Postal Workers (CUPW) continue their long-running contract negotiations, with union workers refusing overtime work, DHL Express has suspended all domestic parcel services within the country.
The move, which also cuts off services between Canada and the US, was prompted by a stalemate in DHL’s own contract negotiations with its unionized workers. DHL also cited the implementation of a new Canadian federal law that prohibits the use of replacement staff during a strike.
The nationwide shutdown took effect on Friday, disrupting service for prominent DHL customers, including apparel giant Lululemon, industrial firm Siemens Canada, and major e-commerce retailers Shein and Temu.
DHL has been in negotiations with Unifor, the union representing over 2,100 of the company’s truck drivers, warehouse staff, and sortation workers. After workers walked off the job on June 8, DHL initially tapped replacement workers to manage parcel volumes.
However, the situation was upended by new federal legislation, Bill C-58, which came into force on June 20. The law bans federally regulated companies from using “scab” labor during a strike or lockout. Fines for violating the new law can reach C$100,000 (approximately USD $73,250) per day. Faced with the inability to legally operate without its unionized workforce, DHL opted to suspend its Express services.
