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Market Update

Freight Market Update: September 28, 2021

Ocean and air freight rates and trends; customs and trade industry news plus Covid-19 impacts for the week of September 28, 2021.

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Flexport VP of Ocean Strategy & Carrier Development Nerijus Poskus shares his thoughts on the larger trends on the TPEB.

Read More: Transpacific Shifts: Import Demand Is Changing the World’s Busiest Trade Lane


Ocean Freight Market Update


Asia → North America (TPEB)

  • Traffic on the TPEB worsens as the number of vessels awaiting berths has surged in recent weeks at destination (70 vessels awaiting berth at LA/LB) and particularly at origin (150 doing the same at Shanghai and Ningbo). Sustained peak season demand on TPEB continues to produce congestion flare-ups, which in turn breed bottlenecks and strains elsewhere on the trade lane. This cycle of pile-ups worsening, improving, and worsening again is proving to be the new normal and is expected to continue at least through the New Year and likely until inventories are replenished to sufficient levels.
  • Rates October 1 GRI implemented by most carriers.
  • Space Critical
  • Capacity/Equipment Critical/Severe Undercapacity
  • Recommendation Continue to book well in advance (at least 4 to 6 weeks) prior to CRD for best chance of hitting it. Encourage suppliers to support departures from different origin ports. Consider terminating cargo at destination coastal ports to prevent intermodal delays.

Asia → Europe (FEWB)

  • Space and equipment crunches continue. Market demand is consistently exceeding supply, and rates have skyrocketed for quite a long period. Overall space situation is worsened by blank sailings and poor equipment availability. Carriers are overcommitted and are limiting booking acceptance or rolling shipments. With continuous vessel delays and shiftings, schedule reliability is very low.
  • Rates Rates remain at a record high level but have been stable going into September and a marginal increase in October. Most carriers have extended their premium rates.
  • Space Extremely critical space situation
  • Capacity/Equipment Severe equipment shortage across all Asia origins.
  • Recommendation Book at least 4 to 5 weeks prior to CRD. Consider premium options, which may be limited. Be flexible in regard to equipment.

Europe → North America (TAWB)

  • Terminal congestion along the US East Coast is creating a cascade of delays in vessel schedules. Congestion at LAX/LGB port is getting worse with over 70 vessels in queue. Rates remain high and expect to maintain at these levels at least till end of Q4 due to tight capacity.
  • Rates GRI October 1 implemented
  • Space Critical
  • Capacity/Equipment Capacity remains tight for both North Europe and Mediterranean services. Better equipment availability at port, shortages remain at inland depots.
  • Book 5 or more weeks prior to CRD. Request premium service for higher reliability and no-roll guarantees.

India → North America

  • Global port congestion is challenging the repositioning of equipment and available ocean carrier capacity as local ISC governments explore ways to incentivise carriers to support the ISC market
  • Rates Increased for 1H October
  • Space remains a challenge as global congestion is resulting in omissions and altered sailing schedules
  • Equipment of all types are in deficit. Carriers are working to reposition empties while also placing large orders of new equipment. Local governments are looking internally to create monetary incentives to attract ocean carrier support. India is doing this by temporarily extending when carriers must pay import duties on empty containers from 6 to 9 months.
  • Recommendation Use premiums on urgent shipments and shipments with CRD approaching. If routing to USWC, consider rerouting to USEC. Be flexible with inland container depot (ICD) location and equipment type.

North America → Asia

  • Space continues to be tight for USWC POLs. USEC capacity has been more readily available; however, as port congestion continues to increase, there is concern of void sailings occurring due to extensive schedule delays.
  • Rates Multiple GRI’s announced for dry and reefer cargoes on Oct 1 and Oct 15 expected to be implemented..
  • Equipment Deficits on containers and chassis are still plaguing IPI origins. Availability for standard equipment at ports has not been an issue, but any special equipment is hard to come by.
  • Recommendation Please place bookings 4 to 6 weeks in advance to secure your ideal sailing

North America → Europe

  • There is available capacity on the TAEB trade with carriers looking for cargo from the US East and Gulf Coasts. US West Coast service to Europe is extremely tight.
  • Rates to remain steady into October.
  • Equipment Deficits are still plaguing IPI origins. Availability for standard equipment at ports has not been an issue, but any special equipment is hard to come by.
  • Please place bookings 3 to 4 weeks in advance for East Coast/Gulf sailings and 4 to 6 weeks for Pacific Coast sailings.

Air Freight Market Update


Asia

  • N.China: With the upcoming national holiday in mainland China (10/1-10/7) just around the corner, the market remains hot as shippers rush to push out cargo. TPEB rates remain high and capacity is tight, but post-Golden Week, some supply is expected to return to the market, and rates may also start decreasing. The FEWB market is trending similarly to TPEB with capacity also quite tight. LHR rate levels have increased due to a capacity shortage. Lastly, the mainland has recently been affected by rolling power cuts and rationing of power supply largely due to the coal shortage and increased prices in the market. This may result in decreased production and help alleviate the current market constraints however the power situation is ongoing. Overall, we anticipate the market to be relatively quiet from the end of the holiday to the week after.
  • S.China: Capacity in the market continues to be tight and several carriers have canceled flights as a result of numerous flight re-routings to HKG caused by increased Covid cases in China. TPEB and FEWB rates continue to climb in the lead up to Golden Week, and shippers are rushing to ship out their cargo before the holiday.
  • Taiwan: Due to ongoing supply chain constraints around the world some shippers are facing raw material shortages, resulting in delayed production times. Capacity to the USWC is quite full with many technology companies continuing to ship their Q4 volume as scheduled. USEC capacity is very congested and many ORD flights are still cancelled until further notice. Due to the strong market demand some carriers are pushing their express and priority service. Ocean to air conversions are also starting to pick up on FEWB lanes and may lead to tighter capacity to come.
  • SE Asia: Space ex-Northern Vietnam is full until October 7 for all US destinations. Due to SE Asia origins being transit hubs, airlines are sometimes not able to guarantee space even with express rates. The situation is worsening as the US holiday season and year end approaches and more ocean to air conversions are saturating the market. Rate levels are expected to either stay at the current levels or increase come October. Space ex-Southern Vietnam remains extremely tight with rate levels continuing to increase. Rates are expected to climb even higher next month. The Vietnamese government has allowed some factories to resume production in Southern Vietnam, so demand is likely to increase.

Europe

  • Demand stable WoW, various cargo projects on the market from AMS, MXP and OPO airports. Rates still have remained steady as there is enough capacity to meet demand. Some delays for import and export cargo due to high volume experienced at ground handling terminals. FRA and AMS are affected in particular
  • Great news in terms of PAX capacity injection from November onwards on the TAWB. Fully vaccinated EU travelers will be allowed to enter the US, vice versa for US travellers entering the EU. This is promising for air freight, as any uptick in demand before various holidays in the US can be met with more capacity quickly. Potentially a sign of a more stable peak season on TAWB when comparing with other distrusted tradelanes.
  • EU airlines still offer attractive solutions into US hubs via secondary hubs. This is keeping the rate levels stable.
  • Far East Eastbound still recovering, but almost back to full operational capacity. Golden Week is approaching, therefore be prepared for any consignee warehouse closures.
  • US ground handler delays are still 2 days on average. We are also beginning to see a strain on EU export terminals at AMS and FRA, but this is not uncommon as we enter Q4. Manage expectations with clients accordingly for the upcoming quarter
  • Advice continues for all trade lanes ex EU: Place bookings at least 7 days ahead of CRD for most optimal rates and routing solutions.

Americas

  • US: Export demand remains steady and stable. Some capacity constraints are reported, but still manageable. Larger shipments from major outbound gateways can take 2 to 4 days from booking to uplift into the EU, LATAM, or Asia.
  • LAX/ORD/JFK ground handlers continue to face large backlogs and are using off-airport facilities to manage the flood of inbound cargo, which has a trickle-down effect on the export side. Many have implemented new earlier close outs for exports to accommodate the additional time.
  • Recommendation Book early considering the dwell time at airports.

Updates from Flexport's Customs & Compliance Team

The US Trade Representative Announces Exclusion Extensions for Covid-19 related Merchandise

The US Trade Representative granted an extension to active exclusions for impacted products used to combat Covid-19 from Section 301 tariffs on products from China. The exclusions were to expire on September 30, 2021, but will now expire on November 14, 2021. The USTR extended their application to allow the agency to review comments on whether the USTR should extend the exclusions even longer.

The Dept. of Commerce Introduced Updated Antidumping/Countervailing Duty Enforcement Regulations

The Department of Commerce finalized new rules for updating current antidumping and countervailing duty administration and enforcement regulations. Some changes include areas like affirmative scope determination, namely that if a product falls under the scope of an AD/CV order, it is a determination that the product has always been within that scope. The new rules are effective later in 2021.


Factory Output News

US New orders for durable goods rose 1.8% in the month of August, jumping from $258.6 billion in July to a record $263.5 billion in August. Excluding transportation equipment, new durable goods orders increased 0.2% in August, slowing from the 0.8% gain seen in July but also rising to an all time high of $182.7 billion. [Source]

US Durable goods shipments declined 0.5% in August, primarily driven by a 2.7% decrease in shipments of motor vehicles and parts. With transportation equipment excluded, durable goods shipments increased 0.2% in August to a new all time high of $182.6 billion. [Source]

US The goods trade deficit rose from $86.82 billion in July to $87.60 billion in August, remaining elevated with an average deficit of $89 billion year to date. Goods exports increased from $147.94 billion to $149.04 billion, a new all time high. [Source]

Italy In order to avoid a new surge of cases, the government makes Covid passports mandatory for all employees [Source]

UK Britain’s government is implementing emergency measures in an effort to keep gasoline flowing [Source]

Mainland China China power cut spreads, shutting factories and dimming export growth outlook. [Source]

Vietnam Manufacturing moves out of Vietnam after pandemic forced factories to close [Source]

Cambodia Grace period for export containers extended from 5 to 7 days at PAS [Source]

Cambodia Cambodia calls for closer trade and investments with Mauritius [Source]

Indonesia Government considering curbs on export of processed nickel with <70% nickel content [Source]

Sri Lanka Over 1000 containers are stuck at Colombo port as importers struggle to meet their import bill due in US dollars. This is due to insufficient US dollars in local banks thus they are unable to clear their goods. [Source]

Bangladesh The government has allowed export of 4,500 Tones of Hilsa to Bengal which was by far the largest amount the government has allowed in recent years. [Source]


Freight Market News

Port Congestion Worsens in China and US As peak season kicks into gear and holiday shopping begins, Daily Breeze reports 70 ships sitting outside the Ports of LA and LB—roughly 525,000 40-foot containers that need to be unloaded. But according to FreightWaves, there are more than double that—154 as of Friday—waiting off Shanghai and Ningbo in China.

Read More: New Post-Covid Indicator Shows Q4 Goods Demand Starts Strong

Air Capacity Falls, Rates Climb As demand grows, the airfreight industry is getting creative for capacity, with some carriers looking to remove seats from passenger aircraft to create more cargo space. Lloyd’s Loading List reports the capacity squeeze is reflected in rates, with key trade lanes reaching over $1 million.

Read More: What Will It Take to Unsnarl Trucking in Europe?

Electricity Rations Shut Down Chinese Factories The government-imposed power cuts, meant to curb carbon emissions, could create further delays in receiving shipments at ports, adding to strains in container shipping, according to The Loadstar.

Read More: Transpacific Shifts: Import Demand Is Changing the World’s Busiest Trade Lane


Economic highlights from Flexport Chief Economist Dr. Phil Levy

Fed Foreshadows Tightening. The US central bank said it could begin pulling back from its aggressively expansionary monetary policy as early as the beginning of November. The reduction in extraordinary bond purchases could be complete by the middle of 2022, setting the stage for interest rate hikes.

OECD Economic Outlook is upbeat on economic growth, but warns that inflation is not likely to drop to pre-pandemic levels. It assesses that higher commodity prices and global shipping costs are adding around 1.5 percentage points to G20 consumer inflation.

Purchasing Manager Indices for the US and Euro Zone showed continuing expansion, though in each case supply chain problems were cited as a hindrance.

Elusive Election Majorities. Early results from German parliamentary elections showed the SPD narrowly leading the CDU, but either needing a coalition to govern.

  • Canadian parliamentary elections left Prime Minister Justin Trudeau with a plurality.

US-UK Trade Deal Doubts. A trade deal between the US and UK slipped even further into the distance with the normally ebullient Prime Minister Johnson striking a skeptical tone following a meeting with President Biden.


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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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