Shipping Risks Persist, Rates Rose Last Week

Shipping rates rose last week with both the Baltic dry and FBX global container indices rising to their highest since April 1. Iran’s seizure of an Israeli cargo vessel in the Strait of Hormuz on the weekend plus an increase in tensions in the Middle East are likely to support shipping rates. While unlikely, the closure of the Strait remains a risk. In MNI Supply Chain Index Not Yet Impacted By Threats To Shipping, we note that disruptions to vessels don’t appear to be impacting supply chains and while costs have risen they are well below pandemic peaks and already off their 2024 highs.

• The decline in shipping rates from the extremes of 2021 has been an important driver of lower global inflation. While shipping costs are not looking materially inflationary at this stage, they are also not going to provide further help in returning inflation to target.

• The FBX container index rose 2.1% last week to be up 87.5% year to date, after two consecutive weekly drops. In early February, it was up 157.6% YTD, and so has eased considerably since then.
• The China/East Asia to Mediterranean route rose 4.7% w/w to be up almost 85% YTD but it is still 36% off its mid-January peak and this region is particularly impacted by threats to shipping in the Middle East.
• China/East Asia to the east coast of North America rates fell 1.1% last week, the ninth straight decline, to be up 69% this year. The index peaked in early February.
• The Baltic Dry Index rose 6.2% last week but is 17.4% lower than the end of 2023.