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Market Update

Freight Market Update: September 20, 2022

Ocean and air freight rates and trends; customs and trade industry news plus Covid-19 impacts for the week of September 20, 2022.

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North America Freight Market Update Live | Thursday, September 22 @ 8:30 am PT / 11:30 am ET

The State of Trade: Is the Supply Chain Crisis Over? | Thursday, September 29 @ 9:00 am PT / 12:00 pm ET

European Freight Market Update Live | Tues, October 4 @ 16:00 CEST / 15:00 BST

Ocean Freight Market Update

Asia → North America (TPEB)

  • Golden Week capacity concerns no longer pose a concern when compared to last year.
    • U.S. Market: The continued downtrend in floating market rates leading into Golden Week—despite the planned blank sailings—indicates that demand from shippers will not be materializing. Congestion at the U.S. ports remains under control and the called-off U.S. railroad strike spells good news for inland congestion concerns, as well.
    • Canada: The West Coast ports (Vancouver/Prince Rupert) are operating at near yard capacity creating vessel berthing delay issues for Vancouver (12 vessels total, down 6 from last week). The port and IPI congestion has been consistent week-to-week but is down overall from its peak over the summer.
  • 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).

Asia → Europe (FEWB)

  • Demand remains sluggish with no pre-Golden Week cargo rush. Space is available but schedule reliability continues to be affected by a large amount of blank sailings, vessel sliding, and port omissions. Serious port congestion in Europe, particularly Hamburg and Rotterdam, is causing further delays and late return of vessels to Asia.
  • Rates: Ongoing rate pressure on spot rates due to low demand.
  • Capacity/Equipment: Generally open space despite the impact of blank sailings and vessel delays.
  • Recommendation: Allow flexibility when planning your shipments due to anticipated congestion and delays.

Europe → North America (TAWB)

  • Capacity is likely to increase late in Q4 2022 as Transatlantic Westbound (TAWB) becomes the most lucrative trade for carriers based on Dollar/nautical mile calculations. US railroads strike has been tentatively called off as unions appear to have reached an agreement with rail companies.
  • Rates: For the first time in months we are seeing signs of rates dropping slightly, just not at the same pace as other trades. Most Q4 FAK are an extension of Q3 rates.
  • Space: Still very tight on the U.S. East Coast (USEC) with some space open for direct routing to the U.S. West Coast (USWC). Some space is available out of Turkey.
  • Capacity/Equipment: Equipment availability remains the biggest challenge for all EU origins, particularly in the Mediterranean region. Low empty stacks at inland depots, prioritize pick up from the Port of Loading.
  • Recommendation: Book 4 or more weeks prior to CRD. Request premium service for higher reliability and no-roll.

Indian Subcontinent → North America

  • Further rate decreases seen across most port pairs as capacity continues to outweigh demand.
  • Rates: changes occurring with more velocity across the market. USWC being the most affected where rates are coming closer to Transpacific Eastbound (TPEB) levels. USEC rates are declining, but at a slower pace.
  • Capacity/Space: Space is available across most lanes at standard (non-premium) rates. Decreases in port congestion globally is effectively increasing capacity as ships are experiencing less delays covering shorter periods of time. Increase of capacity expected on USEC services as Pakistan recovers from nation-wide flooding.
  • Equipment: Smaller ports and inland container depots (ICD) will continue to have sporadic deficits based on import/export cargo mix.
  • Recommendation: Take advantage of declining rates.

North America → Asia

  • USEC ports continue to see challenges with vessel congestion and some vessel strings still omitting Charleston and Savannah entirely. Erratic vessel schedules continue to cause significant challenges with changes in posted earliest return dates and vessel cut-offs at the port. For USWC, arrivals and available capacity for Los Angeles is generally open whereas Oakland and Seattle are more fluid.
  • Rates: No GRI’s announced for September/October.
  • Capacity/Equipment: Deficits on containers and chassis continue to plague Inland Port Intermodal (IPI) origins. Chicago remains the most reliable. Availability for standard equipment has not been an issue for most ports. Capacity from the US Southeast to India remains constrained due to continuing port omissions for Charleston and Savannah. Overall capacity for Indian ports requiring a transshipment service remains very tight from both the USEC and USWC.
  • Recommendation: Please place bookings 4 weeks prior to vessel Estimated Time of Departure (ETD).

North America → Europe

  • Congestion issues for the port of Hamburg have lightened. However, with labor action commencing this week for the port of Liverpool, expect additional stress on the schedule-network that may lead to congestion and backlog for other UK ports. USWC service to Europe remains extremely tight due to void sailings and skipped ports caused by systematic delays.
  • All carriers continue their booking stop for shipments to Ukraine, Russia, and Belarus.
  • Rates: No further GRI announcements for September or October.
  • Capacity/Equipment: USEC service to Northern Europe has capacity available however Savannah has irregular challenges due to it being omitted on certain vessel strings. 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 or Gulf Coast sailings and 6 weeks for Pacific.

North America Vessel Dwell Times

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Air Freight Market Update

Asia

  • N. China: Demand has slightly increased compared to last week, largely driven by the approaching month’s end and pre-holiday rush. The market is still stable as inflation, supply chain disruptions, and Covid-19 restrictions in China continue to affect consumer demand and production capabilities. Some airlines have begun canceling a few passenger freighters to offset costs and low demand. Rates have increased a bit over last week but are overall maintaining lower levels.
  • S. China: Rates continue to drop in response to low market demand. The market continues to see 1-2 days of additional transit time in regards to the Shenzhen-Hong Kong border situation.
  • Taiwan: The market remains slack with capacity widely available. There are no impacts to production as a result of the weekend’s earthquakes.
  • SE Asia: The Malaysian and Thai export markets continue to be soft, with airlines unable to fulfill capacity and rates still dropping. Ex-Vietnam the market is beginning to pick up as passenger travel resumes and peak season approaches. Space ex-HAN is also starting to tighten in anticipation of China’s long holiday.

Europe

  • Demand continues to trend at low levels. Capacity available in the market exceeds current demand requirements.
  • Demand is expected to slowly start picking up.
  • Over the coming months, expect capacity to drop and rates to rise as passenger flight frequency decreases.
  • Jet fuel prices continue to slowly decrease, reaching the lowest level since the first quarter of 2022.

Americas

  • Export demand remains steady from all markets.
  • Demand to Hong Kong has seen a large increase.
  • US airports are running at a normal pace.
  • Capacity is opening up further, especially into Europe, where most carriers have increased the number of passenger flights for their summer schedules.
  • Rates remain stable week over week.

Trucking & Intermodal

UK/Europe

  • UK trucking traffic is being impacted by extremely low water levels across the continent. This has brought inland navigation close to a full stop. Barges temporarily cannot go on the Rhine past Cologne, blocking the whole Western/South-Western part of Germany from being serviced via waterways. Low water fees apply for inland barge terminals in Germany & the Netherlands, as barges can only take half loads. This is putting pressure on Rotterdam/Antwerp capacity, as 38% of all containers move to/from Rotterdam via waterways, resulting in overbooked rail and truck options.

Americas

US Import/Export Trucking: Market Trends

  • Canadian congestion continues with yard utilization >90% across the board, along with continued rail congestion. Efforts to mitigate congestion in Toronto and Montreal include CN opening additional relief container yards which could potentially impact drayage rates.
  • Chassis shortages persist, notably in Chicago, NYNJ, Memphis (95% utilization, 10+ day street dwell time) and in LA (9.8 day street dwell for 40’, which is down ~1 day from August).
  • East coast and gulf congestion continues with vessels at anchor in New York and Norfolk. Savannah congestion has increased to 42 ships (up from 36) awaiting berths at the end of August, with wait times in the 9-18 day range. Import container dwell time averages over 10 days.

US Domestic Trucking: Market Trends

  • Tender rejections by carriers have decreased by 70% YoY from 20.8% to 6%, meaning carriers are accepting more loads due to having more capacity.
  • Spot rates crept up in August by $0.02/mi after bottoming out at a 16-month low (down ~35% YTD). Contract rates followed after edging up for several months due to fuel surcharge (FSC) schedules.
  • Load-to-Truck ratios have leveled out going into Q3 but are still down ~33% YoY. This is the key barometer for supply/demand in the marketplace.

Customs and Compliance News

CBP Raises Quarterly Interest Rates for Customs Duties Underpayments and Refunds

On September 19, CBP released the quarterly Internal Revenue Service interest rates used to calculate interest on underpayments and overpayments of customs duties. For the quarter to begin October 1, the interest rate for underpayments is 6% for both corporations and non-corporations and the interest rates for overpayments will be 5% for corporations and 6% for non-corporations. CBP has said the Q3 2022 interest rates are subject to change for Q4 2022.

USTR meets with ASEAN Member-State Counterparts in Cambodia

On September 18, the United States Trade Representative (USTR) led consultations in Siem Reap, Cambodia with ten of her counterparts across member-states of ASEAN. The ministers agreed to spend the rest of 2022 and 2023 working on trade problems connected to energy and regulation, working towards a strategic partnership agreement to be signed in November 2023.

Factory Output news

  • United States: The Philadelphia Federal Reserve’s manufacturing index posted a negative 9.9 reading in September, well below expectations of 2.3 for the month. Any reading below zero indicates deteriorating conditions. Source
  • United States: The Empire State Manufacturing Survey’s headline business conditions index, which measures business activity in the state of New York, rose 30 points to negative 1.5—mainly driven by a sharp increase in shipments (+19.6) and a slight rise in new orders (+3.7). Source
  • United States: The Federal Reserve’s Industrial Production and Capacity Utilization Index saw industrial production decrease 0.2 percent in August, while manufacturing output increased 0.1 percent. Capacity utilization for manufacturing was unchanged in August at 79.6 percent, which is 1.4 percentage points higher than the long run average. Source
  • Mainland China: Industrial output grew 4.2 percent year over year for the month of August, beating expectations of a 3.8 percent increase expected by economists. This increase was mainly driven by a weak year over year comparison due to the COVID Delta strain and related lockdowns in 2021, in addition to new energy vehicle production surging 117 percent due to government incentives for cleaner cars. Source
  • Mainland China: The development of China-Europe freight trains service boosts overseas trade. Source
  • Cambodia: Apparel exports from Cambodia rose 28.77% to $6.466 billion for the Jan-Aug 2022 timeframe. Source
  • Malaysia: Malaysia Chosen as Site for Power Firm Largest Global Manufacturing Facility. Source
  • India: The Prime Minister of India unveiled the National Logistics Policy to bring about a tech-enabled approach to supply chain, as well as to improve overall efficiency. Source
  • Bangladesh/Sri Lanka: A virtual B2B discussion held between Bangladesh and Sri Lanka to discuss a possible collaboration of electronics exporters. Source
  • Pakistan: Garment exports face a potential 35% drop due to flooding fallout. Source

Freight Market News

Drop in Container Spot Rates Steeper than Expected

According to FreightWaves, the drop in container spot rates appears to be moving faster and more dramatically than anticipated. The Asia to U.S. West Coast market is seeing the most significant decline, and more blank sailings are expected following Golden Week in China.

Liverpool Dockers Begin 2-Week Strike

According to The Guardian, dock workers at the port of Liverpool have begun a two-week strike, after the breakdown of negotiations over pay. In addition, Felixstowe dockers will start their eight-day strike on September 27. Both walkouts present fresh risks to UK supply chains.

Flexport Research Updates

Post-Covid Indicator: Consumer Preferences for Durables and Nondurables Diverge

Our latest update shows inflation-adjusted consumer preferences for nondurable goods (e.g. apparel, home/personal care products, and oil products) will fall close to pre-pandemic levels by October. Pandemic preferences for durables (e.g. furniture, consumer electricals and electronics) are proving much more persistent.

Weekly Economic Report: Gimme Shelter

To determine whether the U.S. economy has turned the corner in the fight against inflation, it helps to look at a component that is both central and less volatile than food and energy. The cost of shelter in the U.S. accounts for nearly a third of the consumer price index and looks set to keep rising.

More Discounts, More Shipping - Apparel Inventory Strategies

Inventory-to-sales ratios for apparel firms are well above historic averages. Around half of firms blame lower sales, while a third have deliberately built up inventories to deal with supply chain challenges. Looking ahead, around a quarter of firms plan to cut prices to reduce inventories.

Bullet Dodged - U.S. Rail Labor Relations and Supply Chains

The U.S. rail network, which accounts for over a quarter of total U.S. freight haulage, came close to a widespread strike in mid-September. While the strike was averted with a tentative agreement, mediated by the government, the damage on the highly-interconnected rail network had already begun.

Santa Claus is Coming to Town Early - Toy Inventory Strategies

Using corporate financial data, this report finds there’s been a surge in toy inventories, while corporate earnings calls show the inventory build-up is the result of deliberate actions by manufacturers and retailers.

A quick reminder: the weekly economic report is now its own newsletter! You can sign up here to have these insights delivered directly to your inbox each week.

Air Timeliness Indicator: TPEB ↓ @ 10.1 days, FEWB ↑ @ 9.4 days.

Ocean Timeliness Indicator: TPEB ↓ @ 84 days, FEWB ~ @ 95 days.

Trade Activity Forecast

In the latest update we estimate that trade activity will recover in August after falling in July. On a real , seasonally adjusted basis, imports are set to increase by 0.8% sequentially in August and remain unchanged in September and October. Exports are expected to continue to expand by 2.5% in August with growth continuing through to November.

Logistics Pressure Matrix

  • US: Consumer sentiment improved, but remains well below levels seen earlier in the year. Retail sales fell sequentially in August. Reduced demand appears to be feeding into warehouse storage rates, which dropped to the lowest since March 2021.
  • EU: We find that EU-27 imports have fallen for a fifth month in the past six, and are 5.6% below a year earlier in July. Ocean shipping rates and the time taken for the first stage of Asia-Europe shipping also fell. All three may be evidence of reduced pressure on logistics networks.

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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