The blockade of the Strait of Hormuz is driving up crude oil prices, forcing shipping lines to universally apply emergency surcharges and creating immense pressure on annual ocean freight contract negotiations between shippers and carriers.
Global freight costs are facing enormous pressure as the closure of the Strait of Hormuz sends oil prices skyrocketing, triggering a wave of surcharges across all transport modes.
At a Port of Long Beach press briefing last week, Jonathan Gold, Vice President of Supply Chain and Customs Policy at the National Retail Federation (NRF), stated that shippers are working diligently with ocean carriers to navigate the surcharge puzzle caused by the conflict in Iran.
Pressure on the Annual Contract Negotiating Table
As the deadline to finalize ocean freight contracts approaches, the instability in the Middle East has been exerting an invisible weight on these negotiations. Assessing the contract execution landscape, Gold noted: “Many have these situations spelled out in their annual contracts, so they’re working through those issues.”
In reality, shippers are grappling with uncertainty and significantly inflated costs as the Strait of Hormuz—the vital maritime artery for global oil supplies—remains blockaded. Although import volumes at major US container ports have not yet been severely impacted by the conflict, surging fuel costs will undoubtedly deal a direct blow to retailers.
Also at the briefing, Noel Hacegaba, Chief Executive Officer (CEO) of the Port of Long Beach, observed: “The supply chain is already reacting to rising fuel costs by implementing new surcharges and other cost-saving measures.”
Carrier Responses and Moves by the FMC
Ocean shipping giants such as MSC, CMA CGM, Ocean Network Express (ONE), and Maersk have all begun applying various fuel surcharges and freight rate increases across multiple trade lanes. Against this backdrop, Gold noted: “At the same time, shippers are adjusting how they move cargo to manage costs and avoid congestion.”
However, shippers received some “breathing room” when the US Federal Maritime Commission (FMC) denied requests from certain carriers to implement specific surcharges prior to the statutory 30-day notice period (according to FMC filings dated March 23). Supporting this regulatory move, Gold emphasized: “We agree that importers and cargo owners need clear information on the scope and purpose of any surcharges, and encourage the FMC to continue to evaluate those potential surcharges that carriers are looking to implement.”
The Domino Effect on Trucking and Air Freight
It is not just ocean freight; other transport modes are also struggling to fend off escalating fuel costs. According to Gold, trucking fuel surcharges have skyrocketed by up to 25%.
A representative from the Harbor Trucking Association shared through Hacegaba that the current fuel surcharges: “may be preventing some local motor carriers from recovering costs and they continue to move goods through the San Pedro Bay ports complex.”
In the parcel delivery sector, FedEx and UPS have also issued higher fuel surcharges and rates, setting record ground delivery costs in the recent quarter. In the air freight sector, the surge in jet fuel prices has pushed rates from Northeast and Southeast Asia to North America up by double digits.
Source: Phaata.com (According to Supply Chain Dive)
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