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Market Update

Freight Market Update: June 29, 2021

Ocean and air freight rates and trends; customs and trade industry news plus Covid-19 impacts for the week of June 29, 2021.

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Ocean Freight Market Update


Asia → North America (Transpacific Eastbound)

  • Market levels and temperatures keep rising as both summer and what is traditionally the start of peak season begin. The TPEB market continues to face port congestion, blank sailings, and rate increases in addition to new challenges, like temporary closures at SeaTac terminals (all terminals but Husky were closed on 6/28) due to excessive heat.
  • Rates July 1 GRI + July 1 PSS implemented, and with a July 1 BAF change, rate levels are seeing an uptick.
  • Space Critical
  • Capacity/Equipment Critical / severe under capacity
  • Recommendation Use premium services. Also, to find space for several containers, split POs into LCL shipments. Avoid outports requiring an extra leg to reach larger base ports at origin and IPI routings at destination. Book at least 4-6 weeks in advance of CRD.

Asia → Europe (Far East Westbound)

  • Space and equipment crunch continues. Market demand exceeds supply as rates skyrocket. Situation is worsened by blank sailings and poor equipment availability. Carriers are overcommitted and rolling shipments as a result. Yantian’s closure impacted roughly 700,000 TEU. Now the port has mostly resumed operations but is still dealing with congestion and disruption.
  • Rates Significant increase on July 1st across all carriers. Rates will move up further during July.
  • Space Extremely critical space situation
  • Capacity/Equipment Severe equipment shortage across all Asia origins
  • Recommendation Book at least 4-5 week prior CRD. Consider the limited premium options. Adopt flexibility on equipment.

Europe → North America (TAWB)

  • Strong volume performance and cargo backlog are likely to drive rates up further during Q3.
  • Rates New PSS and GRI will take effect on July 1st.
  • Space Critical, there is high demand on all services.
  • Capacity/Equipment Equipment and space are reliable only with Premium rates. The ongoing port congestion and the ensuing vessel delays force carriers to adjust official schedules in their efforts to reposition vessels. New blank sailings will reduce capacity to USWC in week 29-31.
  • Recommendation Book 5 or more weeks prior to CRD. Request Premium service for higher reliability.

India → North America

  • Capacity remains stagnant as ISC demand increases. In the face of new Covid strains, the ISC region is still seeing heavy demand. Bangladesh has gone back into lockdown to stop the large-scale spread seen in the past. This lockdown is not affecting freight/logistics, but may cause other countries to follow suit.
  • Rates Increased in 1H July and expected to increase again for 2H July
  • Space Tight to USWC and Canada
  • Capacity/Equipment 40HQ are challenging and as a result some carriers are charging surcharges for high cube vs standard 40ft containers. South India still a challenge. Feeder vessel space is tight for routes utilizing transhipment ports.
  • Recommendation Use premiums on urgent shipments and shipments with CRD approaching.

North America → Asia

  • Vessel delays and void sailings continue to shrink capacity. The US West Coast still bears the brunt of lost capacity. Responding to congestion, some carriers have decreased the frequency of their Oakland and Seattle port calls. Carriers prioritizing moving their empties back compounds the situation.
  • Rates BAF levels will increase for July 1. GRI advisories are mostly limited to reefer shipments at this time.
  • Space Tight from the US West and East Coast, however EC may be opening a bit for July. A new service launching in the US Gulf will increase its capacity a good deal. The port of Yantian closure may impact feeder networks for Southeast Asia destinations.
  • Capacity/Equipment Capacity tight from the US East and West Coast. Equipment and chassis tight at most ports and all ramps.
  • Recommendation Book 4+ weeks out.

North America → Europe

  • US and Europe port congestion diminishes capacity. Ocean carriers implement numerous port omissions to make up vessel schedules, causing new backlogs.
  • Rates Steady, but with a July 1 BAF change, rate levels are seeing an uptick.
  • Space Very tight from the US West Coast. The US East Coast is being managed more tightly by a few ocean carriers due to lost space from vessel delays.
  • Capacity/Equipment Containers at US EC ports are available but certain rail ramps are tight. Chassis very tight at both ports and rail ramps.
  • Recommendation Recommend 4+ weeks lead time on bookings from the US East Coast and 5 to 6+ weeks if possible for the US West Coast.

Air Freight Market Update


Asia

  • North and South China exports picking up and showing stronger demand towards month and quarter end. Backlog in ocean markets adds incremental demand due to ocean-to-air conversions
  • The Taiwan market has cooled considerably from the torrid levels at the end of May as reduced factory output from Covid restrictions and more ocean capacity (ships bypassing Yantian) influence airfreight demand. Rates to the US have fallen by about $3-4 per kg from the week prior and stabilized at that level. With Taiwan expected to loosen restriction levels by mid-July, a volume rebound is expected.
  • SE Asia remains very strong mainly due to reduced capacity. Indonesia is the most acute with over a week to get a booking and further flights to and from Indonesia cancelled. Thailand remains congested as well. Vietnam has available capacity.

Europe

  • Demand still steady, with the usual suspect, US West Coast, busier than US Central and US East. Larger shipments are in the market from all EU hubs. We expect steady demand to continue in particular for Portugal & Italian exports throughout July, as many factories scale back production in August for the summer break.
  • Still enough capacity within the market for current demand. As operating conditions improve within the US, some airlines have converted their preighters back to PAX aircraft. Other lanes remain stable. PAX capacity may be reduced from the UK, given the increased growth of the Covid Delta Variant (PAX from LHR <> HKG have been banned from 1 July). However freighters should still be able to operate without restriction.
  • Price of jet fuel increased again this week, carriers are increasing their FSC as of 1 July.
  • No congestion reported at EU hubs for import/export. FRA reports that cargo volumes are high, but manageable.
  • Advice unchanged from last week, book early for the best rate levels. For larger shipments, be open to split across 2-3 uplifts to guarantee best options.

Americas

  • Export capacity remains very well utilized during the month and quarter end. For large consignments it can take 2-3 days from booking to uplift into key European destinations, mainly from the West Coast (WC). Capacity from WC gateways is the most constrained to Europe, while the Midwest and East Coast remains very manageable.
  • Space to India, Nepal, Bangladesh and Indonesia remains very constrained as aid and relief efforts reach the COVID-struck region—currently space is booked out until the middle of July.
  • LAX and ORD ground handlers are still facing backlogs and are using off-airport facilities to manage the flood of cargo. Ground handlers report 2-5 days of backlog for breaking down Import freight. Export cargo can not be tendered earlier than 2 days before actual departure of flight
  • Trucking remains scarce for airport transfers and local pickup and deliveries, especially in LAX/ORD/JFK.
  • 100% screening for all Airfreight cargo will be in effect as of July 1st, 2021!

Updates from Flexport's Customs & Compliance Team

House Republicans introduce GSP and MTB renewal bills mirroring the Senate bill’s provisions

On June 22, Ways and Means Ranking Member Rep. Kevin Brady (R-TX) introduced a bill to renew GSP and authorize a new MTB bill that is an exact copy of the US Innovation and Competition Act’s trade amendment. Much like its Democratic companion, the Republican bill faces an uncertain path to a clean passage, but it sets up greater opportunities for bipartisan dialogue on GSP and MTB.

Read More: New Trade Act Could Trigger Supply Chain Changes by Flexport Global Customs VP Tom Gould

CBP issues WRO for Polysilicon products

On June 24, CBP issued a Withhold Release Order (WRO) for silica-based products manufactured by Hoshine Silicon Industry Co. Ltd., amping up the federal government’s efforts to clamp down on goods it suspects are produced with forced labor. Thus far in 2021, CBP has issued six WROs targeting forced labor.


Factory Output News

China The provisional timeline for China to uplift the border restriction is set for the second half of 2022. [source]

Taiwan Total Covid numbers on downward trend but Delta Variant has entered the country. Part of South Taiwan begins a Level-4 Lockdown to contain the spread. No change to logistics [Source]

S. Korea Cosmetics exports soar to make it the world’s third-largest cosmetics exporter [Source]

Vietnam to receive 1 mil doses of AstraZeneca vaccine weekly, beginning in July [Source]

Indonesia Reports a daily high of 21,095 Covid cases on Jun 26, taking the national tally to over 2 mil, and the death tally to over 56,000. Indonesia now has the highest number of both cases and deaths in SE Asia. [Source]

Thailand Thailand’s economy predicted to recover to pre-pandemic levels in the first quarter of 2023. [Source]

India UAE continues to suspend entry from India despite previously announcing that it would ease entry restriction. [Source]

Sri Lanka The ban on ethanol imports has resulted in a surge of local demand for sugar. Sugar factories are now making profits where earlier they had losses. [Source]

Freight Market News


LA Port Sets Record in May Transport Topics reports that the port of Los Angeles moved 1,012,047 TEU in May, the first time a port in the Western Hemisphere has handled more than 1 million TEUs in a month. On the East Coast, the port of New York/New Jersey moved 796,693 TEUs, its tenth consecutive monthly gain.

Yantian Clears Vessel Backlog After partial closures due to Covid restrictions, the port at Yantian reopened last week and has now cleared the backlog of vessels waiting for berth space. American Shipper reports ships entering the port to pick up export loads are taking priority over those with empty containers to discharge.

Read More: Yantian Port Reopens, but Cargo Backlogs Will Take Time to Clear

European Ports Plan for Onshore Power Five European ports, including Rotterdam, have committed to providing onshore power for large vessels by 2028. Onshore power allows a reduction in carbon emissions as ships can shift their power supply from engines to green electricity when docked. Splash reports regulatory frameworks for the change are in the works.

Economic highlights from Flexport Chief Economist Dr. Phil Levy

US personal income fell 2.0% in May after a 13.1% fall in April. In each case, the decrease was more than explained by a drop in government benefits. The income movements are heavily affected by stimulus payments. In levels, personal income remains above monthly amounts from Q4 of 2020.

Signs of US inflation continue. The deflator used to translate nominal personal consumption figures (above) to real (as in the chart) showed annual inflation at a 3.9% rate. Excluding food and energy, the deflator showed 3.4% inflation. The latter figure was the highest since April 1992.

US imports rose in May by 0.8%, according to advance numbers, with the biggest increases in Foods, Feed & Beverages (5.7%) and Industrial Supplies (4.5%). Exports fell 0.3%, led by a decline in Automotive (down 4.7%)

Wholesale inventories rose in May by 1.1%, seasonally adjusted, while retail inventories fell 0.8%.

Weekly jobless claims have fallen significantly since a 904K figure in early January. But this week’s 411K number, coupled with 418K the week before, meant the 4-week moving average rose for the first time since early April.


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Please note that the information in our publications is compiled from a variety of sources based on the information we have to date. This information is provided to our community for informational purposes only, and we do not accept any liability or responsibility for reliance on the information contained herein.

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