Container spot rates fall further, jet fuel supply at risk

Amid the Strait of Hormuz stays mainly closed, container spot rates are falling. Bunker fuel prices remain high, but have eased. For air freight cargo, the cancellation of passenger flights is creating challenges. And is Europe running out of jet fuel if the war persists?For the second week in a row, the Drewry World Container Index has fallen. Higher fuel costs and war-risk surcharges fail to support rates as weak demand persists. We see an increase of 15% on the Rotterdam to New York trade, though. This is driven by capacity reductions and peak season surcharges. Spot rates on Shanghai - Rotterdam and Shanghai - Genoa fell by 4% and 8%, according to Drewry, due to weak seasonal demand and excess capacity.Bunker fuel prices remain about 55% higher than pre-war levels, Freightos notes. However, they have declined by roughly 15% from their peak a month ago and have fallen a further 9% since the beginning of this month. This, in combination with the current low season and overcapacity, may be causing container spot rates to fall. On the broader container market, the war in Iran has had little effect, aside from higher fuel charges. If the Strait of Hormuz remains closed in the coming months, this situation could change. Carriers could face significant bunker shortages in the next two to three months, according to Freightos. The shipping consultancy states that peak season could become less busy due to the war impacting inflation and consumer demand.Europe is running out of jet fuel before summerFor air freight cargo, the situation is different. This depends heavily on passenger flights. Almost all airlines have already canceled less lucrative flights, and this could become a broader phenomenon in the coming weeks.Last week, International Energy Agency (IEA) Executive Director Fatih Birol warned in an interview with AP that Europe has roughly six weeks of jet fuel supply remaining. IATA responded in a statement by its Director General, Willie Walsh: The IEA's assessment of potential jet fuel shortages is sobering. We have also estimated that by the end of May we could start to see some cancellations in Europe for lack of jet fuel. This is already happening in parts of Asia. Along with doing everything possible to secure alternative supply lines, it’s important that authorities have well-communicated and well-coordinated plans in place in case rationing becomes necessary, including for slot relief.” Other organisations, such as Airports Council International and Airlines for Europe, have also expressed concern.Jet fuel prices remain at roughly twice their pre-war levels, but have eased by 12% since the start of the month, notes Freightos.