Situation

Carriers have proactively cancelled and consolidated services in an attempt to stabilize freight rates, reducing capacity by up to 30%. This, combined with stagnating demand, has led to full vessels and backlogs, particularly on Canadian routes.

The situation is further complicated by the ongoing low water levels on the St. Lawrence River. Last year’s water levels, which affected areas from eastern Ontario to below Montreal, were considered the lowest in over a decade. This has prevented vessels from being loaded to their full capacity until now.

As a result, carriers are implementing General Rate Increases (GRIs), Peak Season Surcharges (PSSs), and in Canada, even Low Water Surcharges (LWSs). Furthermore, rising fuel prices are triggering additional costs like higher bunker charges and emergency fuel surcharges, which are already being passed on to inland trucking and rail services.

Obstacles

The major point of uncertainty remains the development of fuel costs, which is directly tied to the volatile situation in the Middle East. This makes bunker prices (VLSFO) unpredictable and forces carriers to adjust Bunker Adjustment Factors (BAF) and Emergency Fuel Surcharges (EFS) with very little notice on all global trade lanes.

Outlook
We expect these conditions to persist for several more weeks. If demand remains stable at these levels, available capacity is expected to rebalance over time, which could eventually lead to a normalization of freight rates.

Main Ports: North Europe to US East Coast

^{Source: Market average rates for 40‘ containers according to www.xeneta.com}

Main Ports: North Europe to US West Coast