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Market Update

Freight Market Update: July 12, 2022

Ocean and air freight rates and trends; customs and trade industry news plus Covid-19 impacts for the week of July 12, 2022.

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North America Freight Market Update Live | Thurs, July 14 @ 8:30 am PT / 11:30 am ET

Ocean Freight Market Update

Asia → North America (TPEB)

  • Whether there will be a true peak season on the transpacific eastbound (TPEB) this year remains unclear. Floating rates continued to trend downward in recent weeks and carrier capacity remains available. Space and cheaper rates on the floating market continue to entice importers with fixed-rate contracts looking to take advantage of near-term cost savings. Carriers are expected to better balance capacity than they have historically (pre-pandemic). Chassis shortages and inland congestion continue to create snarls at destination, while current ocean transit times are much-improved when compared to those seen earlier in the year and through much of 2021.
  • 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 have picked up in Q3. However, the overall market is relatively stable without a major surge in volumes. There have been a large amount of blank sailings and omissions. Europe’s consumer confidence and demand level continues to be impacted by economic and political uncertainty.
  • Rates: Rates are mostly extended or slightly reduced going into 2H 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)

  • Demand for August is expected to be lower due to some European factories closing from late July until mid-August. Anticipate a high return of demand beginning in September. Congestion is improving on both the East and West Coast but still far away from normality.
  • Rates: Most June rates extended through July. Some carriers implemented Peak Season Surcharge (PSS)/General Rate Increase (GRI) charges ex Portugal and Spain due to equipment availability. 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 the U.S. east coast (USEC) and U.S. west coast (USWC).
  • Capacity/Equipment: Equipment availability remains the biggest challenge for all EU origins, particularly in the Mediterranean basin. There is better equipment availability at port, while 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

  • Ocean carriers embrace different pricing strategies as some maintain their 1H July rates into 2H July and others implement rate increases to the USEC.
  • Rates: remain at lower levels compared to peaks just a few months ago. Some key ocean carriers are bullish on demand and have already implemented rate increases on services to the USEC.
  • Capacity/Space: Available at Freight All Kinds (FAK) rate levels. Capacity to USEC is being constrained due to ongoing congestion in Savannah. Vessels are taking longer to return back to India for loading which is resulting in irregular sailing schedules and possible port omissions.
  • Equipment: A rise of equipment deficits are being reported across India.
  • 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. USEC ports continue to see challenges with vessel congestion and some vessel strings still omitting Charleston and Savannah entirely. 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, there are 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 due to local labor actions at base ports in Germany and the Netherlands. 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. 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 or August yet.
  • Capacity/Equipment: US East Coast capacity Service to North Europe has capacity available. Vessel capacity from the port of Houston has been very tight due to a significant increase in demand and delayed vessels. 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: Far East Westbound (FEWB) demand continues to be stronger than that of TPEB due to the tight capacity in the market. The overall market is still trending downwards with airlines reducing rates for both lanes. Covid cases are increasing again in Shanghai but there has been no impact on air freight and trucking at the moment. Meanwhile, Pudong Airport has already reached pre-lockdown levels of daily tonnage turnover. Shanghai is also experiencing its hottest week in recent years which is leading to payload reductions ranging from 3-10%. As a result, some cargo may be offloaded at the last minute and may cause service delays. For Frankfurt (FRA) bound volume, continue to expect delays of 2-4 days due to manpower shortages and flight cancellations.
  • S. China: TPEB market demand is stable while FEWB demand is slightly stronger. Rates remain at similar levels to last week.
  • Taiwan: The market is slack and carriers are eager for cargo. Fuel rates increased by NT$2 starting July 11th.
  • Korea: Demand in the market continues to be low with rates dropping particularly for FEWB. This trend will likely continue through the rest of the summer. Additionally, the potential for an e-cigarette import ban by the US leaves room for concern as e-cigarettes are a hot export commodity.
  • SE Asia: Demand ex-Thailand is weak with some air cargo shifting to ocean. Carriers continue to ask around for cargo in the market. Ex-Malaysia the market continues to be soft with little sign of improvement. Ex-Vietnam the market remains soft with SGN demand and rates dropping slightly from last week.

Europe

  • Demand is stable and expected to drop in line with low summer season levels.
  • Leisure air travel is booming, resulting in ample belly capacity. Global capacity level enough to sustain current demand.
  • Rates are stable and jet fuel price is decreasing. Impact of fuel cost on rates expected to be seen in the upcoming weeks.
  • Disruption continues in AMS, FRA and LHR due to staff shortages. No significant impact on transit times yet.
  • Build pallets below 160CM to increase possibilities of better uplift options and rates on passenger aircraft capacity.
  • Deferred routings via secondary hubs generally still provide cheaper rates.
  • For all trade lanes, continue to place bookings early to secure best uplift options and routings.

Americas

  • Export demand remains steady, and US airports are running at a normal pace.
  • Capacity into Shanghai has normalized and carriers have resumed normal operations and schedules.
  • Capacity into Europe increased during last months due to the additional passenger capacity added for the summer schedules.
  • Shipments into Europe could experience additional destination dwell time due to some labor shortages in the main air hubs.
  • Rates remain stable week over week.

Trucking & Intermodal

Americas

  • US Import/Export Trucking
    • Market Trends
      • Congestion continues at the Montreal and Toronto terminals and inland ramps. The volume coming into Toronto continues to surge, while the number of drivers continues to decrease, which translates into less drivers handling more volume and creating the previously mentioned congestion. On a YTD basis, the total truck visits to the rails has declined by almost 20% percent.
      • Chassis shortages continue to persist, notably now in Memphis (95% utilization, 10+ day street dwell time) and in LA (9.5 day street dwell for 40’).
      • East coast and gulf congestion will continue through July, with vessels at anchor in New York, Norfolk, and Savannah; 36 ships at the end of June awaiting berths with wait times in the 7-10 day range.
      • Los Angeles/Long Beach (LA/LB) conditions have improved with only 3 ships at anchor at the end of June, and port dwells down to less than 5 days. Rail dwells continue to be elevated.
      • Highway Diesel fuel prices remain at record highs:
        • East Coast ($5.85/gallon), Midwest($5.63/gallon), and Gulf coast ($5.37/gallon)
        • West Coast ($6.42/gallon), California ($6.90/gallon) and Rocky Mountain($5.69/gallon)
        • British Columbia, Quebec and Ontario (~$7.3/gallon)
  • US Domestic Trucking
    • Market Trends
      • The domestic FTL market has been suffering from the inventory glut with the highest inventory/sales ratios in history, current global inflation, record high diesel fuel prices, and most recently the sharp drop in container imports.
      • Tender rejections by carriers have decreased by nearly 70% from 2020/2021 averages.
      • Spot rates in the market have bottomed out to a 16-month low, down ~35% YTD, Contract rates fell in recent weeks after edging up for several months.
      • Load-to-Truck ratios are down ~30% YoY, which is the key barometer for supply/demand in the marketplace.
      • Tender volumes are down 19% YoY.
      • Diesel prices remain at record highs, most recently $5.718/gallon. Fuel continues to be a much more taxing operating expense for fleets both on loaded and empty miles. It also increases contract rates which are primarily on FSC schedules.

Customs and Compliance News

USTR Invites Comments on Trade Strategy to Combat Forced Labor

On July 6, the USTR published a Notice and request for comments on the development of a focused trade strategy to combat forced labor. The strategy will identify priorities and establish an action plan for utilizing existing and potential new trade tools to combat forced labor in goods and services. The deadline for submission of written comments is August 5, 2022.

Factory Output news

  • Mainland China: The RCEP agreement helped increase China’s imports and exports to ASEAN reached 1.35 trillion yuan ($202.2 billion), an increase of 8.4 percent year-on-year, accounting for 14.4 percent of China’s total foreign trade. Source
  • United States: New orders for manufactured goods increased 1.6 percent, or $8.4 billion to $543.4 billion in the month of May, according to the U.S. Census Bureau. The inventories-to-shipments ratio of 1.47 remained the same as the prior month. Source
  • Vietnam: Vietnamese Automaker VinFast partners with ProLogium on solid-state EV batteries. Source
  • Thailand: China and Thailand discuss boosting trade ties and regional cooperation. Source
  • Malaysia: Turkey looking at Malaysia for the latest drone export drive. Source
  • Philippines: Philippines seeking to grow via investment from Chinese EV and Battery makers. Source
  • Sri Lanka: Airlines cut capacity to Sri Lanka as jet fuel shortage severely impacts the air industry. Source
  • Bangladesh: Puma looking to increase apparel sourcing from Bangladesh. Source

Freight Market News

Global Air Shipments Dip Along with Prices

While air transport still remains significantly more expensive than pre-Covid days, FreightWaves reports that the amount of global air shipments in the past two months has declined, a trend consistent with the slower economic growth and seasonal patterns. This trend is most pronounced on the North Atlantic trade lane, where spot rates are 5% lower than in 2020.

North America Port Congestion on the Rise

The Loadstar reports that ocean carriers are warning of worsening congestion across the west coast port of Vancouver and the US east coast. Intermodal delays due to forest fires in British Columbia have resulted in the spike in container import dwell times, while the US east coast experiences the impact of the coast shift trend.

Flexport Research Updates

Riding out a Recession - Prospects for an Economic Downturn This report outlines the key measures used to track a recession—only a few are flashing red currently. Should there be a downturn, the most exposed sectors in terms of PCE spending are high-end electronics, while personal care and apparel will experience less of a downturn.

Steel Yourself For CBAM: Legislation Moves Forward, Coverage Expanded This report builds on earlier research and finds that the greatly expanded scope of the Carbon Border Adjustment Mechanism (CBAM) now accounts for over 11% of EU imports compared to 5% previously after the inclusion of more chemicals and plastics.

Weekly Economic Report: Help Wanted While the economy appears to be contracting and retailers worry about increased inventories, the job market in May and June continued to show strength, a highly unusual contrast historically.

Air Timeliness Indicator: TPEB ~ @ 11 days, FEWB ↓ @ 9.5 days.

Ocean Timeliness Indicator: TPEB ↓ @ 95 days, FEWB ↓ @ 91 days.

Logistics Pressure Matrix:

  • US: In the latest update, personal consumption spending dipped but industrial import expectations returned to positive territory, while other key shipping measures are largely unchanged ahead of the peak shipping season with container rates close to record highs.
  • EU: The latest update we find that industrial confidence has worsened somewhat while ocean container rates and timeliness have broadly held station ahead of the peak shipping season.

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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