Market Conditions – As tariff negotiations continue to remain in the spotlight, promising news has emerged regarding the India-U.S. trade deal. U.S. Commerce Secretary Howard Lutnick announced on June 2nd, that "trade negotiators have found a place that works for both countries." This statement has increased expectations for a deal to be finalized before the July 9th deadline. India is the U.S.'s tenth-largest global trading partner, and concluding an agreement quickly is in the best interest of both nations.
The initial trade deal may potentially exclude Section 232 Tariffs on Steel and Aluminum, which recently increased to 50% on June 4th. The U.S. is India's largest trading partner for aluminum, with exports valued at $946 million in 2024, highlighting the significance of this import in the ongoing trade negotiations.
Import volumes from India remained stagnant in May and are expected to continue at similar levels through June. Despite this, ocean carriers have been able to implement substantial four-digit rate increases effective June 1st. This is largely due to the 90-day reprieve on China duties, which has encouraged carriers to shift some capacity from India-U.S. East Coast routes to the Trans-Pacific Eastbound (TPEB) trade. Evidence of this shift includes recent blank sailings on Subcontinent services and ad-hoc calls by carriers like MSC in China before proceeding to Indian ports.
India to U.S. West Coast Market Rates – Trade from the Indian Subcontinent to the U.S. West Coast primarily uses Trans-Pacific Eastbound services. Due to a doubling of TPEB trade rates on June 1st, the price difference between shipping from the Subcontinent and from China quickly widened to $2,000-$2,500. This disparity fueled general rate increases on June 1st, with most ocean carriers (excluding Hapag-Lloyd) raising their rates by $1,000-$1,500 per 40-foot container. Limited shipping capacity from India to the U.S. West Coast is anticipated throughout peak season. Ocean carriers are expected to seek further rate increases on July 1st as Chinese exporters rush to ship goods before potential tariff changes on August 11th. This will likely keep U.S. West Coast vessel utilization above average.
India to U.S. East Coast Market Rates – Rate levels increased significantly on June 1st, as ocean carriers successfully implemented their first general rate increase in several months for this trade route. Rates surged by approximately $1500 per 40’ container, representing a more than 50% increase from pre-June levels. Due to limited capacity to the U.S. East Coast, driven by strong import demand from China, we expect current rate levels to be maintained at a minimum. Further increases are possible on July 1st, particularly if a favorable trade agreement with China is reached, which would ensure sustained high demand through the remainder of peak season.
Pakistan & Sri Lanka to U.S. Market Rates – Elevated market rates have persisted since the May 2nd embargo by India and Pakistan. This required ocean carriers to restructure services and add transshipment points for U.S. East Coast containers. Following a June 1st rate increase, rates from India to the U.S. East Coast are now largely aligned with other market rates.
Sri Lanka Port Congestion – The Port of Colombo is experiencing significant container dwell time delays, averaging 7-14 days with no short-term improvement expected. As of June 5th, over a dozen vessels are currently waiting to berth. These delays stem from two key issues: transshipment disruptions caused by the India-Pakistan embargo (leading some carriers to use Colombo for East Coast cargo), and capacity restrictions on services to the U.S. West Coast, which are causing terminal congestion in Colombo due to high utilization. Delays are anticipated to persist through at least June and into July.
ICD Equipment Availability – Multiple disruptions, including the Red Sea situation and Pakistan-India hostilities, have limited ocean carriers' ability to reposition empty containers to various Inland Container Depots (ICDs) across India. We have observed significant and growing equipment imbalances due to shortages of empty containers since June 5th as a result. The recent surge in exports from China and Southeast Asia (like Vietnam and Thailand) is also a factor, as carriers prioritize higher-yield markets. We expect empty container availability to remain challenged throughout June and into July at minimum. Importers sourcing from India should book well in advance to help secure equipment.
Suez Canal – CMA-CGM recently announced the resumption of its MEDEX service, which connects Indian ports directly to Malta, Genoa, and Barcelona in the Mediterranean. The first ship is expected to pass through the Suez Canal on June 28th. Major ocean carriers will monitor the situation closely. If the agreement between the Houthis and the U.S. holds, carriers could begin planning to restore at least some services in 2025, which would be a significant positive development.
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