by Dave Akers, IHSA
Stephen Hawking said “Intelligence is the ability to adapt to change.” Based on our industry, we must be the founding members of Mensa.
As we reach the final days of the 2026 contract season, the landscape has been fundamentally reshaped. Transpacific ocean carriers have responded to the soaring fuel prices caused by the ongoing Middle East crisis by layering new Emergency Fuel Surcharges (EFS) on top of traditional Bunker Adjustment Factors (BAF). This strategy has been deployed to recover extraordinary costs arising from the Strait of Hormuz disruptions, which caused bunker prices to nearly double earlier this spring.
Carrier Surcharge Execution
- Emergency Overlays: Carriers like Hapag-Lloyd and Maersk successfully introduced EFS/EBS to bridge the gap left by standard Marine Fuel Recovery (MFR) mechanisms.
- FMC Regulatory Lag: For U.S.-bound shipments, the mandatory 30-day notice period meant that while global surcharges hit in late March, the full weight of these costs became effective for the Transpacific between April 8 and April 15, 2026.
- Rate Escalation: Recent data shows spot rates on the Shanghai to Los Angeles route jumped by 9%, a spike driven almost entirely by these fuel surcharges rather than base rate adjustments.
- The China Exception: The Chinese Ministry of Transport (MOT) remains a critical bottleneck. EFS for cargo originating from Mainland China or Taiwan to the U.S. is currently not being applied, as official regulatory approval is still pending. Until granted, these specific surcharges remain “on hold,” though Inland Haulage Fees (IHD) are being charged where applicable.
Example: On the Singapore to Long Beach route, carriers have now implemented specific EFS/EBS alongside updated quarterly BAFs as of April 2026.
Impact on May 1 Contract Finalization
The timing of these “emergency” implementations throughout April has significantly complicated the final weeks of annual negotiations. With the May 1 deadline for BCO and NVO contracts now here, the following trends have defined this cycle:
- Accelerated Signing: Major retailers (Walmart, Target, Home Depot, Costco, and Amazon) finalized agreements early to secure capacity. This triggered a wave of mid-sized BCOs to follow suit, prioritizing space protection over further price haggling.
- Fixed-Rate Erosion: Shippers seeking “all-in” fixed rates found carriers largely immoveable. Carriers have insisted on “fuel-adjustable” clauses, refusing to absorb the volatility of the $900+/ton bunker market.
- Transparency Disputes: A primary friction point in these final signatures has been “double recovery.” Importers have pushed back on EFS amounts to ensure they aren’t paying for the same fuel spike twice through both the EFS and the upcoming Q3 BAF adjustments.
- Capacity Scrambling: The rush to sign was accelerated by the fear of additional Peak Season Surcharges (PSS) or further fuel hikes expected to land in May.
Indexed-Rate Contracts Under Pressure
Index-based container rates have proven particularly vulnerable. Because major freight indices (like the SCFI) are often “all-in,” layering a separate EFS on top of an index-linked rate has resulted in some shippers paying for the same fuel volatility twice. This “double-dipping” remains a major point of contention in final contract language.
“In the contract dance we go to every year with the ocean carriers, it seems harder and harder to hear the music, and some of the partners have two left feet and no sense of rhythm!”
In the annual contract dance, it is becoming increasingly difficult to find the rhythm. The market is currently grappling with a messy combination of record-high vessel capacity and unpredictable geopolitical shocks.
- Rhythm Problems (Operational Reliability): Global schedule reliability fell to 59% in February and hovered near there through March. The “two left feet” of the carriers—massive blank sailing programs—have been used aggressively to keep rates from collapsing despite an oversupply of new ships.
- Missing the Beat (Geopolitical Shocks): The conflict in the Middle East has forced persistent diversions away from the Suez Canal, adding 10–14 days to transits and making “standard” transit times a thing of the past.
- A Tense Conclusion: Carriers have used these disruptions as leverage to demand higher rates, while shippers have pointed to the influx of new vessels as a reason for discounts. The result is a 2026 contract season defined by tension: carriers dancing for survival, and shippers dancing for reliability.
The conclusion of this year’s “annual contract dance” marks a pivotal moment for the industry. While the introduction of emergency surcharges and geopolitical shifts added layers of complexity, the successful finalization of contracts across the market demonstrates a high level of strategic maturity. For BCOs and shippers alike, reaching the finish line in this environment required a sophisticated balance of risk mitigation and cost management.
IHSA
While the industry continues to find its rhythm, IHSA members can move into May with the confidence that their logistics foundation is secure, transparent and built to withstand the unique challenges of 2026. Successfully navigating this landscape requires constant vigilance and a strategic approach to carrier relations. If you are not currently an IHSA member and would like to learn how our collective scale and expertise can help protect your supply chain from future volatility, please reach out to team@shippersassociation.org for more information.
