Freight Market Update: May 10, 2022
Ocean and air freight rates and trends; customs and trade industry news plus Covid-19 impacts for the week of May 10, 2022.
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Ocean Freight Market Update
Asia → North America (TPEB)
- Shanghai remains locked down, with a sharp spike in demand expected once restrictions ease. Restrictions continue to be in place due to Covid-19 outbreaks in the major manufacturing region. Destination US and Canada ports, especially on the West Coast, are seeing less congestion and fewer dwelling vessels—trends likely to be temporary. Long-anticipated International Longshore and Warehouse Union (ILWU) and Pacific Maritime Association (PMA) labor negotiations are set to begin this week as stakeholders await news of any impact. In Northern China, both cargo and demand backlogs are piling up, as traditional peak season looms. For cargo ready now, importers might consider taking advantage of currently available space and softer floating market rates.
- Rates: Levels remain elevated relative to the pre-Covid market with softening in many major pockets, especially to the West Coast.
- Space: Mostly open, except in pockets.
- Capacity/Equipment: Open, except in pockets.
- Recommendation: Book at least 2-4 weeks prior to cargo ready date (CRD). Consider premium options where needed. 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.
Asia → Europe (FEWB)
- Disruptions continue to dominate the trade. The continued Shanghai lockdown and impending COVID measures in Beijing are affecting factory production, warehousing, and trucking availability. Last week’s booking intake was affected by the extended Labor Day holidays in China. On the destination side in Europe there is impact due to congestion in several ports which is causing re-routings and further delays.
- Rates: Rates remain at a high level but have been on a downward trend since March due to a slowdown in the market. This trend is continuing in May.
- Space: The space situation is tight for Named Account Contract (NAC) but space is available for Freight All Kinds (FAK).
- Capacity/Equipment: The equipment situation is somewhat improved due to lower exports out from Asia but there are no structural changes.
- Recommendation: Book at least 2 to 3 weeks prior to CRD. Be flexible in regard to equipment. Plan on taking into account that congestion may delay cargo.
Europe → North America (TAWB)
- Congestion is still improving on the U.S. west coast (USWC), vessel waiting time now down to 10 to 17 days.The U.S. east coast (USEC), especially Charleston, has shown some signs of improvement with delays between 1 to 4 days.
- Rates: The upwards trend continues as vessels are still booked up to July sailings. Capacity remains tight with some little space opening for USWC on specific services.
- Space: Critical for both USEC and USWC due to ongoing (improved) congestion and continuing strong demand.
- 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.
Indian Subcontinent → North America
- USEC port congestion and vessel schedules are normalizing as equipment deficits increase due to the lack of Chinese imports arriving into countries in the region.
- Rates: Rates remain at elevated levels for May.
- Space: A temporary softening of demand is being experienced on major port pairings to the USEC and USWC. This softening is not expected to last as we near reopening of major China ports and an influx of volume will be sent to ports such as Los Angeles/Long Beach (LA/LB) and Oakland.
- Capacity/Equipment: Equipment deficits are being reported across many ports in India. Most affected are the S/SE ports, Kolkata, and Inland container depots (ICDs) in North India.
- Recommendation: Load via wet port and avoid Inland container depots when possible. ICDs are a chokepoint for containers which often leads to delays in shipping order release. Booking on some premium services will give you priority on equipment.
North America → Asia
- Vessel arrivals and available capacity remain fluid for all USWC ports and anticipate more blank sailings due to the vessel backlog in Shanghai. The USEC continues to see challenges with vessel congestion and some vessel strings omitting Charleston and Savannah entirely. Erratic vessel schedules continue to cause significant challenges with posted earliest return dates and vessel cut-offs at the port.
- Rates: Limited general rate increase (GRI) activity announced for May, no announcements for June.
- Capacity/Equipment: Deficits on containers and chassis continue to plague Inland Port Intermodal (IPI) origins. Availability for standard equipment at ports has not been an issue for most ports but carriers have advised of continuing shortages on 40’s at the port of Oakland.
- Recommendation: Please place bookings 4 weeks prior to vessel Estimated Time of Departure (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. The port of Houston is also experiencing capacity constraints due to schedule delays and port congestion with one service being reduced from weekly to biweekly. 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: No GRI announced for May or June.
- Capacity/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.
North America Vessel Dwell Times
Air Freight Market Update
- N.China: Despite recent falling case numbers, Shanghai has further tightened lockdown restrictions in a bid to eliminate infections outside quarantined areas by the end of this month. Flight capacity has improved slightly compared to last week and rate levels maintain at similar levels. Some factories in nearby cities are beginning to resume their production in phases, however trucking capacity continues to be constrained.
- S. China: Ex-South China the market continues to ramp up after the long holiday and rates have dropped compared to the previous week. Cross-border trucking capacity is slowly resuming. As north China continues to face lockdown measures, we anticipate more cargo to re-route through South China. Guangzhou airport recently reported a positive Covid case however further updates are pending.
- Taiwan: The market is stable and space is open. Fuel will increase starting from May 10.
- Korea: Demand on the Transpacific eastbound (TPEB) tradelane remains strong while the far east westbound (FEWB) market is weak with rates dropping slightly.
- SE Asia: The market in-Thailand is stable, while ex-Malaysia and Vietnam the market remains soft due to the long public holiday.
- Demand is still strong but expected to decrease in the upcoming slack summer season. Additional passenger capacity has created a surplus of cargo capacity.
- Rates are stable with transatlantic (TA) lanes starting to show a decrease in rates. Jet fuel pricing is also starting to decrease.
- Freighter capacity remains constrained, booking to uplift window is approx 10-14 days.
- Build pallets below 160CM increase the possibilities of uplift sooner than on a freighter.
- Deferred routings via secondary hubs are still providing cheaper rates overall.
- Terminal congestion at London Heathrow (LHR) is starting to reduce.
- For all trade lanes, continue to place bookings early to secure best uplift options/routings.
- Demand remains high, especially into Europe. Capacity remains manageable due to the additional belly capacity added in the Transatlantic trade lane.
- Origin dwell times of 3 days have been reported in some cases.
- Most airlines have canceled their flights into Shanghai Pudong (PVG) due to the current COVID-related lockdowns.
- Early bookings are highly recommended.
- Los Angeles, Chicago, and New York (LAX/ORD/JFK) ground-handlers are dealing with high volume considering the heavy export throughput.
- Rates into Europe and Asia are stable. LATAM has experienced a slight increase compared to previous weeks.
Trucking & Intermodal
- US Import/Export Trucking
- Market Trends
- Trucking capacity in major North American markets is starting to open up as import volumes decrease across the region. The lockdowns we have seen over the past weeks across major China cities like Shanghai, Guangzhou, and Beijing, will further reduce the inbound volume US ports receive in May.
- Inland markets' trucking capacity also remains high, driven by the lack of offered IPI bookings.
- The cartage market is beginning to soften due to the air market, and carriers are seeking volume. This softening is providing Flexport trucking an opportunity to evaluate the carriers in each market and start strategically allocating volume to carriers. The goal is to have specific partners assigned to different aspects of cartage in preparation for peak. Rather than having one carrier handle all cartage in a market, we will specify partners for airline transfers (intact vs loose) and for local pickups and deliveries.
- Market Trends
- US Domestic Trucking
- Full truckload (FTL) demand continues to soften due to stocked inventories, consumer spending slowdown, recent inflation, and global conflict. Tender volumes are down 20%+ year over year (YoY) in April and the market has shifted in favor of shippers.
- Tender rejection rates have fallen to 10.43%. This reflects a 50% decrease since early March, and a 60% decrease YoY.
- After peaking in early March, Diesel prices remain at record highs hovering over $5/gallon. Fuel continues to be a much more taxing operating expense for fleets both on loaded and empty miles.
- Spot market rates have plummeted by as much as 20-25% year to date (YTD), whereas Contract rates remain steady and moderately increasing. The spot market acts as a leading indicator for where rates are headed due to the transaction nature, while contract rates are not as fluid since they’re tied to longer-term agreements.
- Forecasting freight demand remains a challenge as COVID shutdowns in China and the war in Ukraine both present unknown risks to future availability and demand for certain commodities or materials.
Customs and Compliance News
Senators Vote to Move Forward on Section 301 Exclusion Process Language
The U.S. Senate voted affirmatively on a motion by Senator Pat Toomey (R-PA) to see language reopening the Section 301 Exclusion Process included in the compromise China trade bill.1 The House's America COMPETES Act omits language on the Section 301 exclusions while the Senate’s USICA instructs the US Trade Representative to reopen the exclusion process while permitting some space for her keep the process closed. The vote was not binding, but rather an expression of the chamber’s sentiments leading up to the negotiations on the compromise bill.
Factory Output news
- Taiwan: Taiwan’s April export increased 18.8% YoY driven by strong demand for electronics. Source
- Vietnam: Vietnam’s agricultural sector recorded a $4b trade surplus in Q1. Source
- Vietnam: KSTAR to build first Vietnam manufacturing factory in Haiphong. Source
- Cambodia: Construction underway for Cambodia’s new multi-purpose port in Kampot. Source
- Indonesia: Inflation reached a 3 year high due to stronger exports in Q1. Source
- Sri Lanka: Sri Lanka imposes nationwide curfew and deploys army in Colombo after five people were killed in the worst violence in weeks of protests over an unprecedented economic crisis. Source
- Sri Lanka: Tea export crisis as Sri Lanka faces lowest export in 23 years. Source
- Bangladesh: Chittagong seaport faces acute shipping jam with vessels waiting up to 8 days post Eid-ul-fitri holiday. Source
Freight Market News
Port of Los Angeles Not Yet Impacted by Shanghai Lockdowns According to Supply Chain Dive, the Port of Los Angeles has not yet seen a noticeable impact from the Covid-19 lockdowns in Shanghai, as the number of vessels leaving China and bound for San Pedro Bay has remained consistent. Meanwhile, the lockdown has mostly affected shippers with supply constraints slowing assembly lines.
China Lockdowns Prompt Increase in Blank Sailings The Loadstar has reported that ocean carrier alliances are preparing to blank more than a third of their sailings from Asia in the coming weeks, due to this reduction in export freight. In response to the increase in blank sailings, cargo lead times from Asia to North Europe will continue to grow.
Flexport Research Updates
Weekly Economic Report: Jobs Galore By almost any measure, the U.S. labor market looks very strong. Unemployment was low, job creation was high, and there were record levels of job openings and quits. The combination likely means that wages will push upward and stoke inflation, despite weaker wage growth in April.
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. The latest indicator saw a slight decrease for the Transpacific Eastbound lane (TPEB) at 11.5 days in the four weeks leading to May 1. For the Far-East Westbound lane (FEWB), delays once again beat their highest level since February 1, hitting 10.7 days as networks continue adjusting to the changes in operations required by 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 TPEB fell for the second consecutive week to 103 days, it’s lowest reading since November 7. The FEWB also saw another drop down to 105 days, continuing a seasonal shift related to the Lunar New Year Holiday in Asia and returning to levels last seen at the end of October.
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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.