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Market Update

Freight Market Update: July 13, 2021

Ocean and air freight rates and trends; customs and trade industry news plus Covid-19 impacts for the week of July 13, 2021.

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Blog: Restock Now—Divide Shipments to Move Crucial SKUs

With ocean capacity in extreme demand and retail inventories falling fast, a new shipment strategy could help maintain business continuity in a pinch.


Ocean Freight Market Update


Asia → North America (Transpacific Eastbound)

  • Peak season is around the corner as all involved parties brace for additional rate increases and space struggles due to capacity that can’t grow quickly enough to catch up with demand forecasts. Persistent congestion, over-reliance on key gateways, Covid-19 related disruptions to labor, and infrastructure development all shape market challenges. Strains on intermodal rail remain severe and are expected to worsen, according to carriers.
  • Rates July 15 GRI implemented
  • Space Critical
  • Capacity/Equipment Critical/Severe under capacity
  • Recommendation Continue to book well in advance (at least 4 - 6 weeks) prior to targeted departure for best possible chance of hitting target departure date. Encourage suppliers to support departures from different origin ports. Consider terminating cargo at destination coastal ports to prevent intermodal delays.

Europe → North America (TAWB)

  • Capacity remains severely constrained. Strong volume forecasts and cargo backlog keep upward pressure on rate levels.
  • Rates July 1 GRI implemented.
  • Space Critical
  • Capacity/Equipment Tight and guaranteed only with Premium rates. Several vessels are omitting Rotterdam due to the ongoing port congestion there. Be flexible re. departures from different origin ports. 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

  • Container shortages return as demand increases. These challenges are expected to persist throughout the summer
  • Rates 1H July rates increased with another increase expected for 2H July.
  • Space Critical to the USWC and Canada. USWC particularly LA/LB is in the most demand and getting to Canada from ISC requires lengthy transshipments in the Medeteranian
  • Capacity/Equipment Container shortages are here to stay. In April many ISC countries expressed confidence the shortage was passed, but it’s back. Booking rejections due to no equipment is becoming more prevalent at ICDs and South India ports.
  • Recommendation Use premiums on urgent shipments and shipments with CRD approaching. Book out as far as possible to increase the chance of a timely shipping order (SO) release from the ocean carriers.

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.
  • Rates One carrier has announced GRI intentions for August for all dry exports to Asia.
  • Space Tight from the US West and East Coast, however EC may be opening a bit for July. Gulf capacity has increased with capacity more readily available.
  • Capacity/Equipment Capacity tight from the US East and West Coast. Equipment and chassis are tight at most ports and all ramps.
  • Recommendation Book 4+ weeks out.

North America → Europe

  • US and Europe port congestion diminishes capacity. The diminished schedule reliability and ongoing delays continue to create void sailings with vessels so far behind.
  • Rates Steady.
  • 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 but with proper lead time procuring capacity is more manageable.
  • 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 for the US West Coast.

Air Freight Market Update


Asia

  • Demand jumps up ex-China and rates have moved higher as a result. The only exception is HKG to the US West Coast where rates fell slightly due to an influx of additional charters to LAX. Demand is expected to continue to strengthen for the rest of July into August.
  • SE Asia sees demand increases in markets like Hanoi (HAN), while Covid lockdowns in Indonesia, Thailand, and Malaysia cool markets. Jakarta (JKT), where rates have soared as a result of the vast majority of capacity being suspended due to the Covid outbreak, is the most impacted origin.
  • The Taiwan market has stabilized and Covid cases have fallen as the government continues Tier 3 lockdowns until July 26th. Moving to Tier 2 should allow most factories to resume full production levels. The market should pick up at this time and remain strong through the balance of the summer.

Europe

  • Another week continues where we see steady demand from all of the hubs in the EU. While Northern Europe ocean-port congestion continues, we will continue to see strong demand for air cargo. When converting from ocean to air, be flexible for larger volumes. Be open to longer transit times and splitting bookings across multiple uplifts.
  • For FEEB in particular, secondary hubs into China with road feeder services to primary hubs can offer cost effective solutions.
  • PAX capacity continues to be injected to all US & LATAM destinations, driving rates down slightly. The effect of the Covid Delta Variant on market capacity remains to be seen.
  • Slight congestion at terminals for import into AMS. Other hubs/terminals reporting high volumes but managing without any significant issues.
  • Advice is ongoing: early bookings and flexibility can offer innovative solutions for import/export into EU

Americas

  • 100% screening for all airfreight cargo for U.S. exports is in effect as of July 1st, 2021! Ground Handlers report longer lines for cargo throughput for export, as screening takes more time than anticipated.
  • Export demand remains very steady while no meaningful capacity is added. Larger consignments, from the West Coast and Midwest, may take 2-3 days from booking to uplift into key European destinations. Capacity from the West Coast and Midwest Gateways is most constrained to Central European gateways such as AMS/CDG/FRA, while East Coast capacity remains balanced and 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 end of July, but ad-hoc capacity is opening up.
  • LAX and ORD ground handlers still face large backlogs and are using off-airport facilities to manage the flood of cargo. Ground handlers report 2-5 days of backlog to break down import freight. Export cargo can’t 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.

Updates from Flexport's Customs & Compliance Team

CIT issues preliminary injunction in Section 301 case

On July 6, the Court of International Trade issued a preliminary injunction on plaintiffs' unliquidated entries that are subject to Section 301 List three and four tariffs, providing temporary relief to importers that are party to the case. The two judges who sided with the plaintiffs said that importers’ entries that liquidate could present “irreparable harm” because those duties would be unrecoverable.

ITC publishes changes to HTSUS

The International Trade Commission (ITC) published their semi-annual update to the Harmonized Tariff Schedule of the United States. The biggest changes are the removal of General Note 12 on NAFTA and statistical changes to COVID-19 supplies and miscellaneous products. Importers should consult with their brokers to see if the changes impact them.

Budgets for trade policy and enforcement agencies heating up

The House Appropriations committee has proposed increasing budgets for the Office of the US Trade Representative, the ITC, and Commerce’s International Trade Administration to align with President Biden’s priorities for trade policy. However, CBP is also pushing for more funds, as they face staffing shortages keeping up with increased inspections of cargo imports.

Read More: A Jump in Customs Enforcement Shows Data Can Create or Limit Risk


Factory Output News

Mainland China car sales had a 5.1% YoY drop mainly due to the semiconductor shortage caused by global supply chain disruptions. [source]

Taiwan In the first 6 months of 2021, exports grew 31% while imports to Taiwan grew 28% [Source]

South Korea suffers capacity losses as vessels are prioritized to China. In May, the number of incoming container ships to Busan fell almost 10 percent [Source]

Japan Tokyo under 4th state of emergency from Monday, July 12th. [Source]

Vietnam Movement controls in Ho Chi Minh further tightened [Source]

Indonesia Emergency restrictions expand to cities across the archipelago [Source]

Freight Market News


Covid Still Ravages Seafarer Crews Efforts to vaccinate seafarers aren’t moving quickly enough to prevent outbreaks onboard vessels. According to Bloomberg, Gard P & I, one of the world’s largest marine insurers, reports a spike in Covid-related claims of more than 100 outbreaks monthly in April and May. The insurer compares that volume to last summer, when approximately 80 of the same types of claims were made in a two-month period.

Downsizing Planes Could Limit Freight After international travel demand fizzled due to the Covid pandemic, airlines have started to invest in narrower aircraft. FreightWaves reports one airline intends to order supersonic jets, which are slimmer than typical wide-bodied planes. In the short term, airlines are relying on smaller planes for international flights. Both options have the potential to reduce freight capacity on key trade lanes.

Read More: Bring in the Dogs: New 100% Air Cargo Screening Rules Take Effect

Peak Season Kicks Off with a Surge As the backlog from the Yantian port closure flows into the US, West Coast ports expect a cargo surge to introduce this year’s peak season. The Journal of Commerce reports companies are racing to restock as US retail inventory-to-sales ratios plummet.

Read More: Restock Before You Run Out: Smaller Shipments Could Move Crucial SKUs

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

Economic highlights from Flexport Chief Economist Dr. Phil Levy

Wholesale inventories rise by 1.3% from April to May. Sales were also up by 0.8%, leaving the seasonally-adjusted inventory/sales ratio slightly higher than it was in March and April, when it hit its lowest level since 2014.

US jobless claims up slightly to 373K. The 4-week moving average fell to 394.5K, its lowest level since March 14, 2020.

May job openings steady at 9.2M. The quits rate in May dropped back to its March level of 2.5% from a record April high.

European retail sales climb from April to May. In both the EU and the Euro Area, the volume of retail trade rose by 4.6%, with the strongest gains in France (9.9%) and the Netherlands (9.3%). Germany was up 4.2%.

ECB sets looser goal. The European Central Bank opted for more inflation tolerance, with a new goal of 2% inflation, versus the previous “below but close to 2%.”

Chinese producer prices outpace consumer prices, rising 8.8% year over year in May, while the CPI was only up 1.1%.

China’s Central Bank eased lending by lowering reserve requirements.


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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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