Beijing summit prompts air freight surge

Figure of the week

73% The percentage of supply chain executives planning to transform their operating model within the next one to three years due to global disruptions, according to a KPMG survey of US supply chain leaders.

Quote of the week

“If the situation in the Middle East continues… at some point, there will be a shortage (of jet fuel). Governments around the world do have emergency stocks on hand, but those are not meant to cover month after month after month of shortages.” Cargolux chief executive Richard Forson expressed concern over jet fuel supplies due to a protracted Middle East war. He added, however, that this danger would “be the least of our worries” given how that scenario would affect the global economy.

All eyes on China amid spot rate volatility

Trans-Pacific container spot rates have posted double-digit increases over the last week, but geopolitical events could soon start to lead to even bigger rate volatility . Analysts believe that the main reason for the rising spot rates is that efforts by carriers to cut capacity are starting to bear fruit. This week’s WCI shows Shanghai-to-Los Angeles rates up 10% week on week, while the Shanghai-to-New York leg was up 14%. Drewry added that the implementation of emergency fuel and peak season surcharges by carriers had also helped push up rates. What has not been seen so far, however, is any direct impact on demand as a result of the meeting between President Donald Trump and Chinese leader Xi Jinping. Whereas air cargo demand has seen a sudden boost as a result of the talks, container freight as yet remains unaffected. In fact, Xeneta chief analyst Peter Sand was even predicting that trans-Pacific spot rates would plateau and then decline as the annual service contract negotiations drew to a close. “One factor behind the short-term market plateau on the Trans-Pacific is US shippers delaying signing new long-term contracts due to the uncertainty caused by the Middle East crisis, and the risk of locking in rates for the next 12 months at a higher level than necessary,” said Sand. “For every delayed contract, more containers must be moved on the spot market, and carriers will charge a premium, but for shippers the short-term pain is worth it if they ultimately secure lower long-term rates in the coming weeks.” Sand said that as new long-term contracts are signed and come into force, volumes will inevitably reflect contracted rather than spot rates, which would lead to a softening of the short-term market. Against that, shippers should also pay close attention to any more talk of potential tariff reductions between the US and China. So far there have been no firm commitments around tariffs, but it did emerge that both countries have appointed a board to consider how to improve trade ties. Any indications that this board is making big breakthroughs could very quickly lead to a spike in demand. Shippers should be on alert .

Beijing summit prompts air freight surge

The impact of the relatively cordial meetings between US President Donald Trump and Chinese leader Xi Jinping has already boosted trans-Pacific air cargo demand and rates . No firm trade deal was reached during Trump’s visit to Beijing, despite trade being near the top of the agenda. However, the warm rhetoric surrounding the visit and the announcement that both countries would establish a board of trade to discuss the finer points of economic cooperation have led to a surge in rates. Analysts were expecting the boost to last for at least another week. An immediate impact for shippers will be that capacity will be harder to come by . For air freight shippers, much depends on events in the Middle East. The longer fuel supplies from the region are disrupted, the greater the potential for significantly higher rises in jet fuel prices and cuts to availability. At the same time, disruptions to the global helium supply could have an unexpected impact on demand. At the moment, the AI boom is one of the fastest-growing cargo categories. Yet helium supplies, critical for semiconductor manufacturing, are being strongly disrupted by the partial closure of the Strait of Hormuz. Shippers could therefore potentially see the Middle East crisis pushing up prices, while also hitting demand and freeing up capacity. It is too early to say which of these factors would have the greater impact, or whether Iran, the US and Israel can reach an agreement .

First tariff refunds raise prospect of legal wrangles

As US Customs starts to issue its first tariff refunds, attention is shifting to how the money will be divided up . Reuters has reported that the first refunds have been issued, among them to toy maker Basic Fun and truck manufacturer Oshkosh. Yet it is worth bearing in mind that the refunds issued so far are relatively modest. Basic Fun was reported to have received only $400,000 out of a $7.4 million claim so far. At stake overall, is a pot worth $166 billion shared among a potential 330,000 importers. Given the size of the potential dividends, there is likely to be significant legal wrangling over who is entitled to a share of the refunds. Although many shippers refused to pass on tariff costs to consumers, i n many cases, costs were transferred through surcharges, adjusted contracts, or higher prices. According to Reuters , some customers have already started to ask importers whether they are entitled to any part of the refund. The next step, where it appears consumers or suppliers shared in the tariff bill, may well be legal action or even class action lawsuits to recover those costs. Nevertheless, only months ago, few shippers would have anticipated being in a position to even discuss this issue right now. Back then, the prospect of tariff refunds seemed far away. There was a widespread assumption that even if the Supreme Court did overturn the IEEPA tariffs, the Trump administration would fight refunds tooth and nail. That could easily have included taking measures to ensure CBP acted as slowly as possible. Instead, the CAPE declaration portal was set up in 45 days and seems to be moving quickly to issue refunds. The next step is likely to be a lawyers’ bonanza .

🤔 Did you know ?

Average wait times at the Panama Canal have risen by 60% since the start of the US and Israel’s war on Iran, and analysts are now worried that congestion could worsen due to growing weather risks. The US National Oceanic and Atmospheric Administration has estimated that El Niño has an 82% probability of returning before July. That could significantly reduce water levels and increase congestion still further at the canal.

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