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Market Update

Freight Market Update: June 7, 2022

Ocean and air freight rates and trends; customs and trade industry news plus Covid-19 impacts for the week of June 7, 2022.

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Logistics Rewired: Air Market Update | Tuesday, June 14 @ 9:30 am PT / 12:30 pm ET

North America Freight Market Update Live | Thurs, June 16 @ 8:30 am PT / 11:30 am ET

The State of Trade: Cracking Bullwhips Versus Packing Full Ships | Weds, June 22 @ 9:00 am PT / 12:00 pm ET

Ocean Freight Market Update

Asia → North America (TPEB)

  • Shanghai has reopened after two months of Covid-19 related lockdowns and restrictions. As of June 1, manufacturing and shipping activity can resume per normal, although a ramp-up period is expected over the next few weeks. In the meantime, demand is still soft on the transpacific eastbound (TPEB) route, as uncertainty remains surrounding whether a spike in shipments and a strong peak season are expected. International Longshore and Warehouse Union (ILWU) and Pacific Maritime Association (PMA) labor negotiations remain underway. 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 into U.S. west coast (USWC) ports.
  • Space: Mostly open, except in few pockets.
  • Capacity/Equipment: Open, except in few pockets.
  • Recommendation: Book at least 2 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)

  • Demand is picking up, but congestion is still having a widespread impact on capacity deployed on this route. With Shanghai reopening, the third quarter is expected to be strong with a summer peak. However, there are many uncertainties on a macro level such as the Ukraine conflict, high inflation across Europe, and low consumer confidence.
  • Rates: Rates are expected to increase in June due to tighter space.
  • Capacity/Equipment: Overall space is starting to fill up again. Congestion in European ports is causing sailings to return to Asia late, resulting in additional delays and blank sailings.
  • Recommendation: Allow flexibility when planning your shipments due to anticipated congestion and delays.

Europe → North America (TAWB)

  • No changes overall on the congestion situation which is slowly improving on both coasts of North America.
  • Rates: Expect June rates to be extended through July.
  • Space: Still very tight but with some signs of improvement on certain loops for both the U.S. east coast (USEC) and U.S. west coast (USWC).
  • Capacity/Equipment: Capacity remains tight for both North Europe and Mediterranean services. Better equipment availability at port. Shortages remain at inland depots.
  • Recommendation: Book 4 or more weeks prior to CRD. Request premium service for higher reliability and no-roll.

Indian Subcontinent → North America

  • Demand remains soft as we approach the second half of June. This has led to carriers passing on rate deductions for many key lanes, with USEC bound shipments seeing the largest decrease.
  • Rates: Decreased for the first half of June. Expecting rates to hold into the second half of the month.
  • Space: Available at Freight All Kinds (FAK) rate levels.
  • Capacity/Equipment: Remaining stable with some reported deficits of equipment at Inland Container Depots (ICDs).
  • Recommendation: Take advantage of declining rates. In the past carriers have implemented blank sailings to avoid underutilization. This could lead to increased rates on the horizon.

North America → Asia

  • Vessel arrivals and available capacity remain fluid for all USWC ports. Continuing blank sailings due to the vessel backlog in Shanghai can be expected. 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) 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 a large number of carriers have advised of continuing shortages on 40s 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 remain in addition to the ongoing schedule issues for USEC ports. The port of Houston continues to experience significant capacity constraints due to schedule delays and port congestion with one service being reduced from weekly to biweekly. USWC service to Europe remains extremely tight due to void sailings and skipped ports caused by systematic delays. The suspension of Pacific Northwest coverage for North Europe may be lifted in July if the operational situation permits. USWC coverage for Mediterranean ports will see capacity reduced with one of the ocean carriers phasing out its service. All carriers have issued a booking stop for shipments to Ukraine, Russia, and Belarus.
  • Rates: No GRI announced for June and no ocean freight increases anticipated for July.
  • Capacity/Equipment: Deficits are still plaguing IPI origins. Availability for standard equipment at ports has not been an issue, but 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

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Air Freight Market Update

Asia

  • N. China: Demand is weak after the long holiday and isn’t expected to recover until mid-June. Carriers continue to return to their original capacity levels, however given the weak demand in the market TPEB rates have decreased slightly while FEWB rates remain stable. President Biden’s push to lift Chinese tariffs may also help to stimulate China exports as well as rally the overall market.
  • S. China: The market is gradually continuing to improve. TPEB demand is stable and rates are similar to last week, while FEWB demand is strong, particularly to the UK.
  • Taiwan: The market is slow but stable, however factories continue to face shortages of raw materials. Airlines are also keeping an eye on USWC port labor negotiations as these discussions may lead to market instability. The market has already started to see some sea-to-air rate requests.
  • Korea: Market demand to the US east coast and FEWB tradelane is weak, while demand to the US west coast remains stable.
  • SE Asia: The market ex-Thailand is quite soft with carriers eager for cargo. TPEB demand ex-Vietnam is continuing to pickup. Rates in the meantime have increased slightly but are expected to continue to rise in the second half of June. In comparison, FEWB demand is stable with rates maintaining at similar levels to the week prior.

Europe

  • Demand is stable at reduced levels while fast/high-end fashion is still showing higher demand due to the season change.'
  • Capacity is stable at an all time high, rate levels are starting to reduce especially on the transatlantic (TA) trade lane.
  • Jet fuel pricing continues to decrease and is now reflected in the fuel surcharge charged by carriers.
  • Freighter capacity is improving with better rates and lead times, booking to uplift window is approx 5-10 days.
  • Build pallets below 160CM increase the possibilities of better uplift and rates based on passenger capacity.
  • Deferred routings via secondary hubs are still providing cheaper rates overall.
  • For all trade lanes, continue to place bookings early to secure the best uplift options/routings.

Americas

  • Demand remains high, especially into Europe. Capacity is manageable and has already surpassed 2019 pre-covid levels.
  • Los Angeles, Chicago, and New York (LAX/ORD/JFK) ground-handlers are busy due to the high export volumes and origin dwell times of 2-3 days have been reported in some cases.
  • Restrictions have been lifted into Shanghai and capacity is improving fast as carriers are resuming normal operations and schedules.
  • Rates have slightly softened compared to previous weeks, especially into and out of Europe. The main reason is the additional belly capacity added into the Transatlantic lane.

Trucking & Intermodal

Asia

  • South Korean truckers go on strike for freight fare hikes. To cope with soaring fuel prices, South Korean truckers went out on strike on June 7 to demand a freight rate increase as well as the extension of the Safe Trucking Freight Rates System.

  • Rates: Rates will increase before strike finishes due to demand and supply unbalance. There is a high chance the cost will increase after the strike as well.

  • Capacity: Capacity dropped significantly while the strike is ongoing.

  • Shanghai came out of lockdown and is gradually recovering. Shanghai finished lockdown on June 1 and trucking operations are gradually recovering.

  • Rates: Rates are dropping, but need some time to return to their previous level.

  • Capacity: Capacity is also gradually recovering, though it is still under half of previous level.

Americas

  • US Import/Export Trucking
    • Market Trends
      • New York, Savannah, Houston, and Norfolk ports all saw vessels at anchor during May; increased volumes have caused chassis shortages and empty return difficulties especially in NY/NJ.
      • Oakland and Seattle/Tacoma are experiencing 12+ day port dwell times. Intermittently empty return restrictions from steamship lines have limited the number of available chassis, reducing the trucking capacity in these markets.
      • Toronto rail ramps continue to experience a high volume of import containers on the ground, causing a need for additional lifts that lead to higher wait times inside the terminals.
      • West Coast labor discussions between the ILWU and PMA have started once again on June 1st. The current contract expires on July 1, 2022.
      • Highway Diesel fuel prices continue on a record high: East Coast, Midwest, Central Atlantic, Lower Atlantic and Gulf coast prices trended down in the second half of May. West Coast and Rocky Mountain prices raised on the second half of May.
  • US Domestic Trucking
    • Contract business is gaining more interest from carriers than spot loads as fuel surcharge agreements are almost exclusively associated with contract freight.
    • Diesel prices remain at record highs, peaking at $5.62/gallon in May. Fuel continues to be a much more taxing operating expense for fleets both on loaded and empty miles.
    • Tender volumes climbed back at the tail end of May largely due to the Memorial Day push. However, overall volumes are still low—down 20% YoY.
    • Tender rejection rates bounced back marginally the last week of May after diving 8%.
    • Capacity has tightened in the South & Southeast markets due to produce season.
    • We are still seeing lower spot rates in the market (down 20%+ YoY), but they crept up in the final days of May.

Customs and Compliance News

Biden Administration Temporarily Halts AD/CV Duty Collection for Certain Solar Cells On June 6, President Joe Biden announced a decision to permit duty free imports of solar cells from Cambodia, Malaysia, Thailand, and Vietnam, regardless of the outcome of a current anti-circumvention Department of Commerce investigation. The Department of Commerce has said they will implement any results after the two-year grace period ends.

Factory Output news

  • Taiwan: The Taiwanese government held trade talks with the EU about the potential of chip and semiconductor manufacturing in the country. Source
  • Vietnam: Foreign companies continue to heavily invest in industrial real estate in Vietnam. Source
  • Vietnam: Apple to shift iPad manufacturing to Vietnam amid Chinese supply chain woes. Source
  • Indonesia: A joint project between Indonesia and Singapore, the Kendal Industrial Park, is projected to expand to twice its current size. Source
  • Philippines: A restive volcano in Manila erupted, spewing ash and steam and causing the country to go on high alert. Source
  • Pakistan: Trade between Pakistan and the U.S. continues to increase month-over-month and year-over-year, according to state bank of Pakistan. Source

Freight Market News

US Import Demand Drops to Pre-Pandemic Levels A recent article in FreightWaves has reported that recent ocean container booking data shows import demand has decreased significantly. Consumer buying patterns have normalized to pre-Covid levels and U.S. retailers are finding themselves with a surplus of inventory. As a result, freight forwarders are seeing expanding margins on ocean freight.

What to Expect Following Shanghai Lockdown As Shanghai comes out of lockdown, ongoing restrictions mean that it will likely take weeks or months to return to the normal level of output volumes and shipper container volumes, as reported by Loadstar. According to their sources, ocean carrier schedules will likely return to normal later in June.

Flexport Research Updates

Space Rates - The State of U.S. Warehousing Logistics networks have been beset by pressures resulting from elevated demand and effectively fixed supply. Then there is the question of where one keeps all the stuff. What is happening with warehouse capacity? Is the sector at risk from reduced demand? Warehouse pricing data from WarehouseQuote shows rates remain high, while economic data shows vacancies may be rising and continued demand growth is in doubt.

Weekly Economic Report: Some Like it Hot By multiple measures, the U.S. labor market looks about as strong as it has for twenty years. A key question is whether that will spur even more inflation. If so, the May jobs report did not pick that up.

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 the TPEB rise to 11.2 days for the four weeks leading to June 5. For the FEWB, there was also a second straight decrease to 10.1 days. Air times may reflect seasonal shifts working their way out of the system as importers switch to summer goods.

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 two days to 102 days after several straight weeks of decline. The FEWB saw no change, remaining at 100 days, likely seeing some of the early year seasonal effects wear off. Continued improvements in cargo ready to departure times may still be moving through the system as Asian ports debottleneck.

Logistics Pressure Matrix Flexport’s Logistics Pressure Matrix (LPM) gathers 10 data points in an attempt to provide a picture of the challenges facing logistics networks from the demand side and a view of ongoing activity on US-inbound routes. In the latest update, the various measures appear to be taking contradictory paths. Retail inventories and shipping rates increased, indicating increased pressure. Yet, the inflation-adjusted value of imports fell and the timeliness of ocean and air freight have improved. Upstream supply chain disruptions may be playing their part.

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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