Pegasus Market Update Q2 2025: No.20

All,

Quick summary outlining some of the changes we expect now, probably through June - most of the tariff changes have been covered extensively by pretty much everyone, so I've tried to give a very simple summary.

The very short version of the current market can be summed up in a few sentences:

1. Space is now VERY short through June 15 at least, and presently, first available ships are about 3 weeks out from today, so early June is more or less booked up
2. Carriers are utilizing this shortage to significantly increase ALL rates and prioritize higher-paying cargo (think post-COVID)
3. Expect and plan for rates to increase to the tune of what looks to be double, although there is a ways to go before those amounts are applied and lots of negotiation and adjustments may be made as the actual supply/demand starts to balance through June.
We are most certainly moving into a summer of volatility in terms of rate and service across multiple modes (Ocean/Rail/Truck) - as usual, we will be here to help you navigate and minimize the impact to your supply chain.

Tariff Updates

• The initial political announcement of a temporary reduction of the US/China tariffs have now been codified in an Executive Order from the US government.
• This means that the 145% tariff (reciprocal plus “fentanyl tariff”) becomes 30% from May 14th. The EO explicitly states the applies to: goods entered for consumption, or withdrawn from warehouse for consumption, on or after 12:01 a.m. Eastern Daylight Time on May 14, 2025.
• Hence, only goods that have been loaded after April 9th and that have already cleared US customs will be stuck having to pay the high tariffs
• At this time, we do not expect USCBP to give refunds to those companies that did pay the much higher tariffs, although those companies certainly deserve it.
• The de minimis tariffs are reduced from 120% to 54%, whereas the 100 USD fixed fee is retained, but the planned increase to 200 USD from June is cancelled.

Rates and Space

• Following the tariff consensus reached between China and the U.S., the reciprocal tariffs were significantly reduced. This major policy shift has immediately boosted market sentiment, leading to a sharp recovery in demand.
• Prior to this adjustment, many carriers implemented blank sailings, causing a short-term undersupply of space.
• As a result, starting May 14th, space ex-China and Southeast Asia have tightened significantly.
• Fixed-rate allocations are being compressed, and carriers are prioritizing high-yield or premium cargo.

Space Situation

• Demand has suddenly surged after USA/China came to an agreement for the tariff, and demands are expected to continue to grow until Jun.
• PSW/PNW: Roll over ratio decreased to around 20% this week, but has started to get tight as demand increased substantially on 5/13. Vessels are expected to be full until the end of May - please check the attached spreadsheet for the blank sailings
• USEC/GULF: Space continues to be tight for USEC with rollover, GULF is manageable at this moment, but expect it to get tight from next week.
• May 15 general spot market increase was $500-$1000

June 1 general rate minimum

Carriers are planning very large increases for June 1 and June 15. At least initially, they are moving toward rate "minimums" again for space, etc. - some examples below as what has been proposed so far - I've also attached CMA's proposal for June 15, which is on top of the May 15 and June 1 proposed increases.

MSC new rate from 01-Jun

FAK: USD6,000/40' to West Coast & USD7,000/40' to East Coast. MSC has also relaunched its Diamond Service from the 2nd half of May, previously introduced during the pandemic. Rate levels proposed @ $7,500/40hq & $8,500/40hq for USWC/USEC as an extra premium service

OOCL new rate from 01-Jun

FAK: USD6,100/40'HQ to West Coast & USD7,100/40' to East Coast. As the 90-day tariff “grace period” takes effect, we are confident that the 2025 peak season will arrive earlier than usual. Until the end of August, space will be a bigger challenge than pricing.

We encourage clients to plan bookings in advance and consider flexible routings when possible. Should you need assistance securing space or require detailed rate analysis, our team remains at your service.

Congestion, Congestion, Congestion:

Plenty of congestion issues at present, and we can all expect it to get worse before it gets better due to (as mentioned previously) carrier scheduling, new hub and spoke routings, still no Suez Canal option, Labor and gate shortages at major US Terminals.

Rail congestion in Newark which is the main rail hub for most IPI cargo to the Midwest from the EC (ALL India, Middle East, Subcontinent, Europe etc.) stated by carriers as "catastrophic" to the point where in the case of Hapag Lloyd, they are rejecting bookings at origin (see attached Loadstar article)

Additional Severe Congestion Ports/Transshipment: Cartagena and several Latin America hubs (Nearshoring, Demand + Schedule integrity), Colombo, Tanger Med, Salalah, Rotterdam, Antwerp - more or less if there is a transshipment, expect some delay somewhere, and plan in advance

LA/Long Beach Terminal and Rail - expect this major hub to also have issues through June, as the labor force is reduced along with gates. Rail service during this time is pretty significantly delayed, and the whipsaw cargo movement of the last month will not help it...

India/Pakistan Update

Port Qasim, which had remained fully operational, is now experiencing severe congestion. Reports indicate that container gating-in takes several hours, primarily due to increased inbound volumes and intensified security protocols. We anticipate that the situation will begin to ease over the weekend.

Service Restructuring and Transshipment Challenges:

In the aftermath of India’s refusal to allow transshipment of Pakistan-origin cargo through its ports (and vice versa), many carriers have withdrawn direct services to and from Pakistan. Consequently, carriers have restructured their service networks and operate feeder shuttles from Karachi to Colombo, Salalah, Jebel Ali, and other transshipment hubs. These feeders connect to mother vessels at those locations, impacting transit times and overall capacity.

As a result of the India-Pakistan conflict, CMA CGM has changed its networks. This is because it is no longer allowed for vessels that have picked up cargo in Pakistan to call Indian ports.

Basically, this means that their EPIC, MEDEX, INDAMEX, and AS1 services have removed all calls in Pakistan and only retain the calls in Indian ports. Instead, CMA CGM has launched a new service called PIKEX, which links the Pakistani ports of Karachi and Port Qasim to the transshipment hubs in Jebel Ali, Khalifa, and Colombo.

Emergency Operational Surcharges:

Several carriers have announced Emergency Operational Surcharges (EOS) to offset increased operational costs and logistical challenges:

CMA CGM: USD 800 per container, effective 15th May 2025

MSC: USD 800 per container, effective 19th May 2025

Hapag-Lloyd: USD 500 per container, effective 21st May 2025

Overall, the pattern emerging shows India retaining their direct network connectivity to overseas ports, Pakistan’s connectivity is becoming reduced, as a large amount of cargo now has to be transshipped. The India/Pakistan conflict, therefore, has the consequence of negatively impacting Pakistani supply chains much more than Indian supply chains.

Update on the USTR Section 301 review - a reprieve until October

On April 17, 2025, the United States Trade Representative (USTR) concluded its Section 301 investigation into China’s maritime, logistics, and shipbuilding sectors.

As a result, the U.S. government will begin phasing in higher fees on Chinese-owned and Chinese-built vessels calling U.S. ports. While the rule takes effect immediately, fees are set at $0 for the first 180 days and will begin increasing from October 14, 2025.

We are monitoring developments closely and will keep you informed.