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Market Update

Freight Market Update: June 28, 2022

Ocean and air freight rates and trends; customs and trade industry news plus Covid-19 impacts for the week of June 28, 2022.

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The State of Trade: Cracking Bullwhips Versus Packing Full Ships | Thurs, June 30 @ 9:00 am PT / 12:00 pm ET

Ocean Freight Market Update

Asia → North America (TPEB)

  • East coast congestion and intermodal challenges persist as vessel capacity continues to further open up. Chassis shortages and long-dwelling containers at the ports and rail yards continue to hinder inland operations. Spot rates have fallen below long-term fixed rates for the first time since April 2020 on the transpacific eastbound (TPEB). Carriers are expected to continue to effectively balance supply and demand via blank sailings. Shanghai activity continues to ramp up. International Longshore and Warehouse Union (ILWU) and Pacific Maritime Association (PMA) labor negotiations continue as current agreements expire on July 1.
  • Rates: Rates remain soft in many major pockets.
  • Space: Open, except in a few pockets.
  • Capacity/Equipment: Open, except in a few pockets.
  • Recommendation: Book at least 2 weeks prior to cargo ready date (CRD). For cargo ready now, importers might consider taking advantage of currently available space and softer floating market rates.

Asia → Europe (FEWB)

  • Volumes are picking up as we enter Q3, a trend that is expected to continue. Overall the market is still relatively stable without a major surge in volumes as of yet. There is still a lot of economic and political uncertainty in the European market which is influencing consumer confidence and demand for goods.
  • Rates: Rates are mostly extended going into 1H July
  • 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 some blank sailings.
  • Recommendation: Allow flexibility when planning your shipments due to anticipated congestion and delays.

Europe → North America (TAWB)

  • Many service strings remain around 100% utilized with carriers reporting full vessels until end of July 2022. Vessel congestion in North America is beginning to improve, but is not back to normality.
  • Rates: Most June rates extended through July. No sign of steep rate decline in the near future.
  • Space: Still very tight but with some signs of improvement on certain loops for both USEC and USWC.
  • Capacity/Equipment: Equipment availability remains the biggest challenge for all EU origins, particularly in the Mediterranean basin. 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.
  • Read more: Carriers expect no improvement in trans-Atlantic schedules this year

Indian Subcontinent → North America

  • Demand is expected to increase as we enter the typical TPEB peak season in July. With increased demand we can expect more constrained capacity and rate increases.
  • Rates: remain at lower levels compared to peaks just a few months ago while some carriers have already filed General Rate Increases (GRIs) for 2H July and 1H August.
  • 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 U.S. west coast (USWC) ports. The U.S. east coast (USEC) continues to see challenges with vessel congestion and some vessel strings still omitting Charleston and Savannah entirely. A few ocean carriers have advised that rail operations from Chicago over the West Coast have improved and are open to increased volumes. Erratic vessel schedules continue to cause significant challenges with posted earliest return dates and vessel cut-offs at the port.
  • Rates: Limited GRI’s for July announced, no advisories for August yet.
  • Capacity/Equipment: Deficits on containers and chassis continue to plague Inland Port Intermodal (IPI) origins. Chicago has been the most reliable. 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

  • Continuing congestion issues in Europe are being compounded by 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 now has reduced capacity due to one string being phased out. All carriers have issued a booking stop for shipments to Ukraine, Russia, and Belarus.
  • Rates: No GRI announced for July and August as of yet.
  • Capacity/Equipment: US East Coast capacity to North Europe has capacity available. Deficits are still plaguing many 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.

North America Vessel Dwell Times

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Air Freight Market Update

Asia

  • N. China: Capacity ex-PVG has almost returned to pre-lockdown levels. With the month and quarter ends around the corner, both demand and rate levels have increased, particularly for far east westbound (FEWB) lanes.
  • S. China: Ex-South China the TPEB market is getting stronger with rates increasing compared to the week prior. FEWB demand remains stable with rate levels similar to last week. Long haul fuel rates will increase by 1 HKD in July.
  • Taiwan: Month end and quarter end demand is strong ex-Taiwan. The raw material shortage situation in the market is continuing to improve. TPEB space to SFO, ORD, and JFK are becoming congested as volumes increase to close out the quarter. For the FEWB tradelane demand is strong and the market tight. Capacity for June is already sold out and the earliest available flights are likely for July 3rd and onward. Although the market demand this week is strong, rates remain stable.
  • Korea: Even with the quarter coming to an end, market demand is still soft, especially for the FEWB tradelane. The fuel surcharge is also expected to increase in July, however the effective date has yet to be confirmed.
  • SE Asia: Demand ex-Thailand is stable. Discounts for dense cargo continue to be available in the market. The market ex-Malaysia remains soft and is expected to continue for the weeks to come. Ex-Vietnam demand has decreased from the week prior. Space is open for both TPEB and FEWB tradelanes.

Europe

  • Demand is maintaining a stable level.
  • Capacity has further increased and rate levels are starting to reduce—especially on the transatlantic (TA) trade lane.
  • Jet fuel price has started to increase and is expected to be reflected in the fuel surcharge charged by carriers in July.
  • 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 stable, as does capacity; especially into Europe due to the additional passenger flights added into the market.
  • Los Angeles, Chicago, and New York (LAX/ORD/JFK) ground-handlers are busy due to the consistent export volumes. Origin dwell times of 1-2 days have been reported in some cases.
  • Capacity into Shanghai has normalized and carriers have resumed normal operations and schedules.
  • Rates remain stable week over week, although fuel is constantly fluctuating.

Trucking & Intermodal

Americas

  • US Import/Export Trucking
  • Market Trends
    • New York, Savannah, Houston, and Norfolk ports have all seen 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 International Longshore and Warehouse Union (ILWU) and the Pacific Maritime Association (PMA) started 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, while west coast and Rocky Mountain prices rose through 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 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

Uyghur Forced Labor Prevention Act Takes Effect On June 21, the Uyghur Forced Labor Prevention Act (UFLPA) took effect. Under the new law, U.S. Customs and Border Protection (CBP) presumes that all goods made in whole or in part in the Xinjiang region of China, or by entities on the newly-released UFLPA Entity List, are made with forced labor, and therefore prohibited from importation into the US. Importer guidance for complying with the law’s due diligence requirements and overcoming the forced labor presumption can be found in the Department of Homeland Security’s UFLPA Strategy.

U.S. to Impose 35% Tariffs on Russian Imports In an Executive Order issued on June 27, President Biden announced the U.S. will increase tariff rates to 35% for over 570 groups of Russian products. The tariff increase is set to go into effect July 27, with an annex listing all impacted products to be published in a forthcoming Federal Register notice.

Factory Output news

Taiwan: Taiwan considers further opening up to foreign visitors by raising the cap on weekly arrivals. Source

Vietnam: Vietnam is likely to replace China as the factory of the world in the near future. Source

Thailand: Car manufacturing for export from January to May slides 40% amid dip in orders. Source

Malaysia: Drone factory to be set up in Malaysia. Source

Singapore: The manufacturing sector surged in May 2022 due to semiconductor production. Source

India: Intel announced the expansion of its design and engineering footprint in India with a new state of the art facility in Bengaluru. Source

Sri Lanka: Port of Colombo loses volume and sees Port of Mundra, India benefitting from the crisis Sri lanka is facing as prices of 20ft & 40ft containers are climbing in mundra. Source

Bangladesh: Bangladesh Prime Minister opens the longest bridge called Padma Bridge that connects with India as it looks to improve the nation’s development index through road, rail and ports. Source

Freight Market News

Spot Rates Fall Below Contract Prices According to The Loadstar, spot container freight rates on the east-west lane continue to soften, as demand dips among western consumers. Data from Freightos indicates that over half of shippers that responded have placed peak season orders early in hopes of building up inventory. As a result, long-term contract rates are now higher than spot rates.

Shippers Continue Airfreight Spend According to SupplyChainDive, brands are continuing to opt for airfreight to meet demand, despite the increased costs. Despite “slower months,” these brands are bolstering supply for the second half of the year, in anticipation of supply chain challenges and delays.

Flexport Research Updates

Dealing with a Downturn - EU Logistics Pressure Matrix In this report we review the state of the EU economy and introduce the European version of Flexport’s Logistics Pressure Matrix. We find that pressure on Europe-bound logistics networks is dissipating but is still well above pre-pandemic levels.

Tech Stops, Energy Flows - Sanctions Impact on Russian Trade This report reviews data from third-party countries to assess the impact of sanctions on Russian trade and finds that Russia’s trade with the EU, China and the U.S. fell by 13% sequentially in April vs. March and by 4% sequentially. Looking ahead the transformation of global energy flows may limit further declines though many sanctions have yet to be fully implemented.

Weekly Economic Report: Front Runner, Slow Progress The Bank of England has been at the forefront of tightening monetary policy and so far inflation and the housing market have yet to respond, though consumer spending is falling. This may indicate more tightening ahead.

Air Timeliness Indicator: TPEB ~ @ 11.1 days, FEWB ↑ @ 10.4.

Ocean Timeliness Indicator: TPEB ↓ @ 97 days, FEWB ~ @ 95.

Logistics Pressure Matrix: Inventory to sales levels increased while nominal imports remained consistent and we saw origin ocean handling times continue to improve while air transit times remain near previous levels.

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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