Freight rates remain high, but show signs of stabilizing amid continued Hormuz blockage
US and Iranian blockades persist in the Strait of Hormuz. Two MSC ships, Francesca and Epaminondas were seized by Iran last week, highlighting the continued risks in the waterway. Traffic is down 95% since pre-war levels, the UN said Tuesday, and daily transits remain near-zero after the collapse of the temporary reopening of the strait. Few Iran-linked vessels were shown exiting the strait in recent days, but did not sail past the Gulf of Oman. It is not clear whether this is due to the US blockade, or if the vessels were scheduled for regional stops.
Compounding risk in the Strait of Hormuz and Red Sea routes, piracy has re-emerged as a threat off the coast of Somalia. Over the last week, three vessels have been hijacked by Somali pirates. The Maritime Security Centre Indian Ocean (MSCIO) said all incidents remain ongoing in an alert Tuesday morning. “Vessels operating in the area are strongly advised to maintain heightened vigilance … particularly within 150NM [nautical miles] of the Somali coast between Mogadishu and Hafun where feasible.”
Despite the ongoing disruption in the Middle East, global container freight rates are showing signs of stabilization. The Drewry World Container Index (WCI) eased 1% to $2,232 per 40ft container, driven by a 6% decline in Asia-Europe routes. Transpacific rates rose 2%, and Transatlantic rates saw a 15% increase, driven by capacity reductions and a PSS effective April 15. Fuel costs remain elevated, but have eased from highs earlier in the conflict. Overall, weak demand and excess capacity are limiting carriers’ abilities to successfully implement rate increases and surcharges.
The post-war surge in global air cargo rates seems to be reaching a plateau. According to the latest weekly figures from WorldACD, average worldwide spot rates rose 1% to $3.73 per kilo, largely driven by a 3% increase out of the Asia Pacific region. Meanwhile, rates from the Middle East and South Asia (MESA) region dropped 2%, aided by a 7% week-over-week recovery in regional capacity. Global capacity remains broadly flat, with jet fuel-related flight cancellations and industrial action in Germany offsetting recovering airline networks in the Middle East.
While recovering Gulf capacity is easing immediate upward pressures, rates overall remain elevated. WorldACD market data shows rates remain more than 40% higher than the end of February, when the war started, and 48% higher than this time last year. And with no immediate end in sight to the US-Iran conflict, widespread fuel shortages will likely keep the market tight.
The Panama Canal Authority reported an increase in tonnage and transits in the first half of FY2026, with a recent spike in demand linked to the Middle East crisis.
Between October 2025 and March 2026, the waterway handled 6,288 vessel transits, representing a year-over-year increase of 224 crossings. Total cargo volume reached 254 million Panama Canal Universal Measurement System (PC/UMS) tons, a roughly 5% year-over-year increase. Daily transit averages climbed steadily from 34 vessels in January 2026 to 37 in March, with recent peak days exceeding 40 crossings.
Average auction slot prices have more than doubled since the outbreak of the war in the Middle East, raising congestion concerns as more ships seek alternate routing. Victor Vial, Vice President of Finance said average auction prices ranged from $135,000 to $140,000 before the war. Between March and April, the average price jumped to approximately $385,000, with some cases exceeding $1 million.
Vial said, however, that those figures represent temporary spikes in demand rather than operational issues, and as most vessels book in advance, there is no queue. This allows for greater certainty, he noted, as the auction relies on specific time slots already worked into the Panama Canal’s schedule.
In the briefing, the risk of a potential drought was also addressed. Deputy Administrator Ilya Espino de Marotta said that in anticipation of a potential El Niño event, the Canal has taken preventative measures to conserve water. She also added that unusually heavy rain during the dry season has kept Gatún and Alhajuela Lakes at maximum levels, setting a strong baseline to manage a possible El Niño later this year.
“We don’t anticipate anything significant between now and December, but we continue to monitor the situation closely. We want to keep the lakes as high as possible heading into the next dry season, so we can continue delivering a high-quality service,” said Espino de Marotta.
The Trump administration is now offering tariff relief to Canadian and Mexican steel and aluminum companies that commit to moving production capacity to the United States.
In a notice published on Thursday, the US Department of Commerce formalized the process for producers in Mexico and Canada to apply for these tariff adjustments. To be eligible, applicants must both “produce steel or aluminum in Canada or Mexico,” and “supply, directly or indirectly (through incorporation into parts), to U.S. producers of automobiles or MHDVs.” The commitments from qualifying companies must be new production.
Tariffs will be reduced by up to half of the applicable rate, with the final adjusted rate being no less than 25%. For imports to receive tariff adjustments, the steel and aluminum goods must qualify for preferential treatment under the US-Mexico-Canada Agreement (USMCA) and be smelted and cast or melted and poured in Canada or Mexico.
To apply, qualified companies will have to submit detailed project-by-project documentation including proposed investment plans, location, production details, capacity, and milestone commitments. Relief is contingent on substantially meeting these milestones and providing the Department with quarterly progress updates.
While this measure may reduce duties and cost pressures on Mexican and Canadian businesses, it has drawn immediate backlash from government officials of the two US trading partners and industry groups. CBC reported Prime Minister Mark Carney on Thursday called President Trump’s sectoral tariffs a violation of the free trade agreement, which is set for a joint review in July. Canada is ready to enter into detailed negotiations, he said, but Canadian officials have stated they won’t heed to excessive demands from the US.
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