Freight Market Update: September 21, 2021
Ocean and air freight rates and trends; customs and trade industry news plus Covid-19 impacts for the week of September 21, 2021.
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Ocean Freight Market Update
Asia → North America (TPEB)
- Congestion returns to peak severity as seen at the port area of LA/LB, where approximately 70 or more container ships are currently at anchor, awaiting berthing space. Shippers and importers continue to pay all-time high premium prices in order to get urgent cargo moving in time for the holiday season. Labor strains, blank sailings, and Covid-19 related disruptions to supply are expected to continue to place additional pressure on capacity in coming months.
- Rates September 15 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 exceeds supply as rates have skyrocketed. There is some talk by carriers about stopping spot rate increases, but it is not yet clear how this will play out. 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 remains very low.
- Rates Rates remain at a record high level but are stable going into September. Rates may increase further due upcoming Golden Week blank sailings.
- 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)
- Congestion at LAX/LGB ports crept up, now counting approximately 70 or more ships in the queue with no expectation to improve in the near term. Tight capacity and equipment shortages keep pressure on rate levels. Expect rate uptick for both spot and long term rates in Q4.
- Rates October 1 GRI likely 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.
- Recommendation Book 5 or more weeks prior to CRD. Request premium service for higher reliability and no-roll guarantees.
India → North America
- New Capacity enter ISC to USEC but equipment deficit will continue to cause challenges with getting bookings released
- Rates Increased for 2H September
- Space remains a challenge as ports of loading omissions are being used as a lever to improve global schedule reliability. Covid outbreaks at key transhipment ports such as Colombo are also causing delays.
- Equipment of all types are in deficit. Carriers are working to reposition empties while also placing large orders of new equipment.
- Recommendation Use premiums on urgent shipments and shipments with CRD approaching. If routing to USWC, consider rerouting to USEC and transload to truck
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 very 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
- N.China: Although PVG airport handling capability is improving and freighter and pax freighters are coming back, the market is still very constrained ex PVG. Airlines are still trying to clear the backlog caused by Typhoon Chanthu. Lead time from booking to uplift is approximately 4 to 6 or more days, possibly more for skidded cargo.The China Golden Week holiday runs from October 1 to October 7.
- S.China: Demand is strong due to end of quarter timing, while supply is not increasing. Many ocean to air conversions are driving prices still further up.
- Taiwan: TPEB market capacity is fully booked. For loose cartons/high density cargo, it is still possible to secure some capacity in the spot market this week, though at very elevated rates.
- SE Asia: Demand for airfreight is increasing significantly and rates are going up on a daily basis as factories in Northern Vietnam run at full speed to clear backlogged orders from Q3. Ocean to air conversions are picking up as there is no available ocean space for cargo to still make it in time for the US holiday season.
- Demand increased slightly this week, with 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.
- Great news in terms of PAX capacity injection from November onwards on the TAWB. Fully vaccinated EU travellers 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.
- Some attractive solutions into US hubs via secondary airports. ORD via DTW or MSP for example.
- Similar to last week, European carriers still offer services from Asia to the US East Coast via European hubs (AMS/FRA/CDG), substituting for the heavy demand on the Transpacific. This is starting to put some pressure however on the FEWB.
- Far East Eastbound cargo recovering slightly as PVG operations are improving week on week
- 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.
- 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
Senate Bill Targets Presence of Non-Market Economies in Free Trade Agreement Products
A new bill from Senators Bob Casey (D-PA), Sherrod Brown (D-OH), and Elizabeth Warren (D-MA), called the Market Economy Sourcing Act, establishes an additional rule of origin for products otherwise qualifying for preferential trade treatment under a free-trade agreement. The additional rule limits the content from “non-market economies” in the production of the final merchandise.
New House Bill Protects Brokers from Bankruptcy Clawbacks
A frequently introduced bill, which seeks to permanently protect customs brokers from the 90-day clawback period related to clients filing for bankruptcy, is making its way through the House of Representatives. The legislation stipulates that duties brokers owe to CBP on behalf of their clients are not vendor payments and would be free from bankruptcy court seizure. The current protections expire at the end of 2021.
Freight Market News
LA/LB Ports to Test Extended Hours FreightWaves reports the Ports of LA and LB announced intent to test extended night and weekend operating hours at truck gates in effort to reduce backlog. The new initiative will cover the hours of 2AM to 7AM PDT, taking steps toward 24/7 operations.
Limited Chinese Air Capacity Threatens Peak Season Covid restrictions in China and Hong Kong are continuing to limit regular air freight capacity according to The Loadstar. Cathay Pacific’s August figures showed a 9% MoM increase for cargo, but volumes were still only 66% of August 2019 levels.
Minimal Relief for Container Shortages Rising demand and continued disruptions in the supply chain are causing longer shipping times for containers, contributing to shortages and inefficiencies. Lloyd’s Loading List reports the situation—exacerbated by the Suez blockage and closures in China—is expected to continue well into next year.
Economic highlights from Flexport Chief Economist Dr. Phil Levy
US retail sales up in August by 0.7%, handily beating estimates of a contraction. Over the last 12 months, clothing was the category leader, up 38.8%. Department stores were up 28.6% while nonstore retailers - an early pandemic winner - were up 7.5%.
Slowing growth in China as retail sales grew 2.5% in the year to August, below expectations.
CPTPP is all the rage with China formally applying to join the TPP-successor trade agreement. The UK earlier launched talks to join. South Korea said it is actively preparing. And the Biden administration even said it might consider taking part in a renegotiation, if on offer.
EU Trade Growth Slows. Yearly merchandise trade between the European Union and the rest of the world increased by 14.1% to July, a much slower rate than June’s 25.9% rise and equivalent to a 1.0% drop compared to July 2019. Reduced trade with the UK (exports down by 13.3% in July 2021 versus July 2019) is mostly to blame. Trade with the US also fell by 6.5% over the same period.
Japanese trade accelerates, with year-over-year figures up 35.2% in August, though exports slowed to growth of 26.2% from 37.0% in July and lagged reported estimates.
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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.