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Market Update

Freight Market Update: March 29, 2022

Ocean and air freight rates and trends; customs and trade industry news plus Covid-19 impacts for the week of March 29, 2022.

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Ocean Freight Market Update

Asia → North America (TPEB)

  • Additional disruptions due to increase in Covid cases in Shanghai are impacting suppliers and causing headaches for shippers and importers. Ocean carriers continue to assess impacts to bookings and have not yet announced any blank sailings, but expect that there will be changes to bookings. There is uncertainty around whether softening currently being seen in the market is expected to last, as post-CNY lulls in demand are traditional and inventory replenishment efforts remain for importers and retailers. Severe congestion, equipment imbalances, sliding vessel schedules, port omissions, blank sailings, and increased fuel charges continue to create challenges.
  • Rates Rate levels remain elevated and the premium market is strong.
  • Space Undercapacity, except in pockets
  • Capacity/Equipment Critical/Severe Undercapacity
  • Recommendation Book at least 3-4 weeks prior to CRD. Consider premium options. Be flexible in regard to equipment and routings. Check closely with suppliers to understand any Covid-related impacts or changes to production outputs and forecasts.

Indian Subcontinent → North America

  • Equipment and fuel shortages coupled with Covid-19 related delays in China continue to impact the ISC region. India, historically a net importer, has seen tremendous growth in exports in the past 2-3 months. This trend has now made India a balanced importer/exporter which means equipment is leaving just as fast as it is coming in. This trend is expected to continue as supply chains shift from other manufacturing countries and to be further exacerbated by ongoing covid related delays in China. Congestion is also growing in S/SE India as well as Colombo, Sri Lanka. A fuel rationing measure in Colombo is resulting in a severe lack of trucking capacity. Delays should be expected for transshipment cargo utilizing Colombo.
  • Rates sustained at high levels into April
  • Space to the USWC will remain a challenge for 2022. Port omissions on services to the USWC continue to cut capacity out of the Indian sub-continent. Recommendation here is to move on premium services. Space to the USEC will be difficult into Savannah, Charleston, and New York until April as bunched vessels off the coast of USEC are resulting in longer turn-around time back to origin and port of discharge omissions. This leaves a gap in sailings for the most consistent services typically relied upon for ISC to the USEC.
  • Equipment deficits are being reported across many ports in India. Most affected are the S/SE ports, Kolkata, and Inland container depots in North India.
  • Recommendation remains to load via wet port and avoid Inland container depots when possible. ICDs are a chokepoint for containers which often leads to delays in SO release. Booking on some premium services will give you priority on equipment.

North America → Asia

  • Vessel arrivals and available capacity remain fluid for USWC POLs. USEC situation sees Savannah operations improving however Charleston continues to be congested and subject to omissions on certain strings. Erratic vessel schedules continue to create void sailings and delays in schedules creating significant challenges with posted earliest return dates and vessel cut-offs at the port.
  • Rates Limited GRI activity announced for late April and early May.
  • Equipment Deficits on containers and chassis continue to plague IPI origins. Availability for standard equipment at ports has not been an issue for most ports but there have been shortages on 40’s at the port of Oakland.
  • Recommendation Please place bookings 4 weeks prior to vessel ETD.

North America → Europe

  • Significant congestion and vessel delays in Europe still remain in addition to the ongoing schedule issues for New York, Charleston, and Savannah. US West Coast service to Europe is extremely tight due to void sailings and skipped ports caused by systematic delays. Pacific Northwest coverage for Europe is suspended indefinitely.
  • All carriers have issued a booking stop for shipments to Ukraine, Russia, and Belarus.
  • Rates One GRI announced for April 1 to UK destinations only. No GRI announced for May as of yet.
  • 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.
  • Recommendation Please place bookings 3 to 4 weeks in advance for East Coast/Gulf sailings and 6 weeks for Pacific Coast sailings.

Air Freight Market Update

Asia

  • N.China: Full lockdowns were announced on Monday for Shanghai’s Pudong and Puxi areas. Pudong will be on lockdown from 3/28 to 4/1 and Puxi from 4/1 to 4/5. Many transportation services are suspended and roads are closed. Terminal operations are still up and running but at lower capacity. Demand is dropping and airlines have already begun canceling some flights. Rates remain flat for now but will likely drop through the end of the month. Once trucking services resume, we expect the market to pick back up.
  • S. China: Some flights remain canceled due to the ongoing Covid and war situations, however, the market continues to gradually improve as operations resume in Shenzhen. TPEB rates have increased compared to the week prior while the FEWB market remains weak.
  • Taiwan: Due to the quarter end and upcoming long holiday, demand is high and the market is tight. March capacity is already full with future flight availability likely available after 4/2. Some flights have also been canceled due to aircraft maintenance. Rates are also expected to increase within these next few weeks.
  • SE Asia: Demand ex-Thailand has improved slightly as the market picks up before the quarter end. TPEB capacity to the US east coast is very tight with rates increasing as well. Ex-Vietnam demand is picking up, especially for the US west coast. Some capacity has been reduced due to aircraft maintenance. The FEWB market remains soft.

Europe

  • Demand is stable again this week, the upcoming change in season is seeing an increase in air freight requests for inventory to be stocked for Summer. To ensure goods arrive quickly, consider smaller batches of cargo across multiple uplifts.
  • Rates are at a stable high and we are seeing fuel surcharges be the reason for pricing increases by airlines. The IATA Jet Fuel Index is now stabilizing at high levels, and airlines will pass through these increased operating costs.
  • Freighter capacity is heavily reduced and booking to uplift window is approx 10-14 days.
  • Deferred routings are still providing a viable routing option if already tight lead times can take it. We also see cheaper options on the market to secondary hubs where airlines have regular passenger flights.
  • Slight congestion at EU terminals, through high volumes, therefore a potential increased transit time.

Trucking & Intermodal

Americas

  • US Import/Export Trucking Market Trends
    • The expanding cartage network has positioned Flexport to move air and LCL cargo with the speed our clients demand. The percentage of intact ULD’s recovered within 12 hours of arrival increased to 55% from 15% in January. Short haul deliveries (final mile between 61-150 miles) have made a dramatic improvement to 126 hours from arrival to delivery, with the goal being 96 hours. We are seeing CFS congestion continue to decline as well, with the OTP gap between warehouse legs and direct to door being nearly erased. Both OTP metrics have improved by 400% since the peak of CFS congestion seen in early January.
    • Port congestion has rapidly increased across several East Coast ocean ports which has negatively impacted trucker’s productivity and chassis availability - and in turn depleted overall drayage capacity. From Houston and the Gulf Coast markets up to NY/NJ, continuous record import volume has overwhelmed the port and trucking infrastructure leading to an increasing backlog of containers & vessels at anchor awaiting berth.
    • The Port of CHS has the highest import dwell time and vessel backlog currently on the EC. Import containers are dwelling an average of 10 days on terminal before pickup - and ⅓ of the total containers at Wando terminal have been dwelling 15+ days. As of this writing, 30+ vessels were awaiting a berth at CHS to unload.
    • West Coast ports are seeing a temporary decrease in the number of vessels at port, congestion issues will persist during March due to the lack of chassis and high terminal yard utilization across all the WC.
    • FSC will likely increase in March as diesel prices continue to rise.
    • The Quebec Ministry of Transport has issued its regulations for the annual Spring Thaw Period, which reduces the authorized load limits on all public roads (8 to 20% weight reduction). The weight restrictions apply to all truck movement to and from Quebec. See below the Thaw Period Dates and Zones
      • Zone 1: From Monday, March 7 (00:01) to Friday, May 6 (23:59)
      • Zone 2: From Monday, March 14 (00:01) to Friday, May 13 (23:59)
      • Zone 3: From Monday, March 21 (00: 01) to Friday, May 20 (23:59)
  • US Domestic Trucking Industry Update
    • Supply/Demand
      • Capacity Update: We are still expecting continued challenges with capacity throughout 2022. It is difficult to tell whether or not we will see equipment and/or driver issues begin to improve as the year progresses, but no clear improvements are expected in the short term.
      • Demand Update: Spot volumes surged in January as continued bouts of severe winter weather and surging COVID case counts made it difficult for capacity networks to find balance. Throughput at the ports and in manufacturing and industrial production continues to act as a bottleneck for freight volumes as there are no signs of a pullback in overall freight movements or demand. We expect to see a slight pullback in spot volumes as a result of improved contract compliance for the remainder of the first quarter, assuming we see stable weather conditions and a continuation of declining COVID case counts.
      • Truckload Demand: Elevated contract rates are resulting in improvements to tender rejections, but only as conditions allow. When capacity is disrupted or driver shortages are exacerbated by surging COVID cases, we expect to see volatility followed by a return to the downward trend once stability is seen. With demand expected to remain strong, easing pressures will only come as fast as capacity can enter the market. In the short term, we expect the next opportunity for surges in market volatility, excluding weather events or other unforeseen events, will be in the back half of March as we approach the end of the first quarter.
    • Looking Ahead
      • The outlook for conditions, as we look ahead in 2022, will continue to largely depend on what we see from truckload demand. Congestion at the ports and backlogged orders in manufacturing and industrial production indicate that we should expect demand strength to continue. Inflation and the expiration of government stimulus will continue to result in a reduction in consumer spending power, likely leading to pullbacks in consumer demand. There has been little to no improvement in capacity conditions, which continued to see challenges with driver and equipment availability. COVID case counts have improved, but new surges have shown the potential to be highly disruptive to both domestic and overseas labor availability, and influence the balance of spending between durable goods and services.

Customs and Compliance News

USTR Reinstates a Multitude of Section 301 Exclusion Extensions

The Office of the US Trade Representative (USTR) has reinstated 352 Section 301 exclusion extensions, reopening the process for importers to obtain duty refunds on entries with eligible products. The exclusion extension is applicable for subject entries from October 12, 2021, through December 31, 2022. The specific exclusion code is not yet active in ACE, but now is the time to reach out to your broker to get started.

U.S. Senate votes on Trade Bill

On March 28, the Senate passed (66-28) an amended version of the House’s America COMPETES Act, including language matching their own USICA bill. Included in the bill now are GSP and MTB renewal provisions, de minimis reform, and Section 301 Exclusion provisions, among others. The bill will return to the House where it is expected a vote will occur later in the week. A further procedural vote in the Senate will then need to occur before compromise negotiations can start.

Factory Output News

  • Vietnam is working towards becoming part of the world's top 15 largest exporters by the end of 2030 Source
  • Vietnam increases overtime cap from 40 hours to 60 hours starting 1 April Source
  • Cambodia MoU signed between the Garment Manufacturers Association in Cambodia (GMAC) and EuroCham Cambodia to provide more support for the European garment companies and fashion brands in Cambodia Source
  • Thailand Chinese automaker Great Wall Motor has signed an agreement with Thailand's government to reduce price of its electric vehicles by 13%-15% Source
  • Malaysia Sensata Technologies, a leading manufacturer of electrical products, have expanded its manufacturing operations in Malaysia Source
  • Indonesia UK’s BritishVolt signed a memorandum with Indonesia to create a more environmentally friendly supply chain for battery manufacturing Source

Freight Market News

Shanghai’s Lockdown Prompts Canceled Cargo Flights According to FreightWaves, the supply chain impacts are underway as Shanghai enforces a staggered lockdown to contain their biggest wave of Covid-19. In Shanghai, many factories and warehouses have closed, and the limited availability of trucks and air staff is greatly restricting the movement of air cargo. While Shanghai airports are still running, a number of all-cargo carriers have canceled flights to and from Shanghai, which will likely cause airfreight rates to rise.

Asia-Europe Spot Rates Soften Briefly As Asia-Northern Europe container spot rates soften, Loadstar reports that ocean carriers have shifted to canvassing smaller shippers with short-term three-month agreements. This is a result of the decreased demand for loaders from China, which is leading to blank sailings and discounted rates. This spot rate decline is likely to be short-lived if lockdown disruptions in China begin easing and prompting the regular flow of exports.

Flexport Research Updates

Post Covid Indicator

Flexport’s Post covid indicator, which measures the balance between U.S. consumers’ spending on goods versus services, indicated that there is little sign of a return to pre-pandemic balance between demand for goods and services. The latest data show that the ratio of consumer goods versus total spending increased in January 2022 to 137% from 100% in December. Looking ahead there may be another dip in the preference for goods versus services, to 123% in March, before an increase thereafter to 130% in May.

While the outlook for durable goods is more volatile than for nondurables, nominal preferences for both are nonetheless expected to remain close to summer 2020 levels at the start of Q2’22.

Air Timeliness Indicator

The Air Timeliness Indicator measures the amount of time taken to move airfreight along two major trade lanes from the point of consolidation to arrival at final destination. Last week the Transpacific Eastbound (TPEB) improved for the straight 10th week while Far East Westbound (FEWB) increased slightly. The TPEB fell to 11.5 days in the four weeks to March 27, down 0.3 days on the week and by over five days from its mid-January peak. FEWB worsened to 9.8 days in the four weeks to March 27.

Both routes also experienced slightly worse “consolidation to origin depart” times, which may reflect the resurgence of COVID-19 related lockdowns in China. There was also an increase on FEWB in “origin to depart destination”, which includes flight times and may represent for the first time the impact of the conflict in Ukraine.

Ocean Timeliness Indicator

The Ocean Timeliness Indicator similarly measures transit time for ocean freight along the same two trade lanes. In the past week, the TPEB increased for the third consecutive week to 111 days due to an increase in handling times in Asia to the highest on record, potentially resulting from Covid-related disruptions in China. The FEWB was unchanged at 114 days and remains at its highest on record.

Freight Market Update is a complimentary service from Flexport, the modern freight forwarder. If you're not already a subscriber, we invite you to subscribe here.

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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