Freight Market Update: December 20, 2022
Ocean and air freight rates and trends; customs and trade industry news plus Covid-19 impacts for the week of December 20, 2022.
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Ocean Freight Market Update
Asia → North America (TPEB)
- Lunar New Year blank sailings announced by carriers:
- U.S.: Transpacific Eastbound (TPEB) rates to the U.S. East Coast (USEC) continue to see softening while rates to the U.S. West Coast (USWC) show signs of leveling off. The ocean carriers will plan more blank sailings for Q1 2023, most to take place one to two weeks prior to Lunar New Year. The goal is to curb both excess capacity and continue to improve schedule reliability by easing port/terminal congestion.
- Canada: Market and rate conditions are similar to the U.S. Vancouver has seen an improvement on vessel count (2) as well as improvements to the berthing delays (20 days). Low TPEB demand has played a role in clearing port and rail congestion.
- Rates: Remain soft on most origin-destination combinations.
- Space: Open.
- Capacity/Equipment: Open, except in a few pockets.
- Recommendation: Book at least 2 weeks prior to cargo ready date (CRD), and keep upcoming blank sailings in mind.
Asia → Europe (FEWB)
- There has been a positive increase in demand and booking intake from week 48. This combined with a higher number of blank sailings in the coming period will result in tighter space in the lead-up to pre-Lunar New Year. Rates are still under pressure but not decreasing as dramatically due to a more balanced supply and demand situation.
- Rates: There is continued pressure on rates.
- Capacity/Equipment: Space has constricted as a result of an increased number of blank sailings and improved demand.
- Recommendation: Allow flexibility when planning your shipments due to anticipated congestion and delays.
Europe → North America (TAWB)
- Capacity is set to increase on average by 30% mainly due to bigger vessels entering the Northern Europe (NEUR) and Mediterranean (MED) market to the U.S. East Coast (USEC). New York and Savannah have been reinstated as weekly calls.
- Rates: The downward trend is expected to continue into the new year. As capacity increases and demand dips into negative territory, rates are set to decrease in the months to come.
- Space: Due to the easing of congestion, space in USEC and U.S. West Coast (USWC) is becoming more available but still not wide open as on some other trades.
- Capacity/Equipment: Equipment availability is getting better as congestion eases up. Low empty stacks at inland depots are also getting better in some specific areas, but prioritize pick-up from the Port of Loading if possible.
- Recommendation: Book 3-4 or more weeks prior to CRD. Request premium service for higher reliability and no-roll.
Indian Subcontinent → North America
- Blank sailings and Equipment Shortages are occurring throughout the Indian Subcontinent market.
- Rates: Continuing to drop week over week.
- Space: Remains open.
- Capacity/Equipment: Capacity will be removed if carriers implement blank sailing programs. We are starting to see this happen on services to the USWC already.
- Recommendation: Be open to procuring equipment from wet ports vs. Inland container depots as equipment deficits are felt in many areas. Diversify your carrier strategy to be covered in case of blank sailings.
North America → Asia
- Capacity, Congestion, and Equipment have all improved amid a continued drop in market demand, but rates have not fluctuated much.
- All services to APAC have low capacity utilization levels with no space constraints.
- Congestion has been cleared out across most North American container yards with improved operations as a result of less demand.
- Congestion does persist in limited pockets around the Gulf and South East Coast.
- The rail performance in a few key markets: Chicago, Dallas, and Kansas city, has also seen improvement.
- Rates: the floating market rates are not fluctuating anywhere near as rapidly on the outbound trades as much as the inbound trades. Rates are trending slightly downwards MoM and QoQ on certain lanes from coastal ports (USEC, USWC) to Asia base ports in China, Japan, Taiwan, S. Korea. Other lanes are displaying stability in rate levels.
- Space: open and manageable with Cargo Read Date (CRD) to Estimated Time of Departure (ETD) lead times improving from Q3 to Q4 significantly from 3-4 weeks to ~2 weeks across most lanes.
- Capacity/Equipment: No major capacity changes in the market with very limited blank sailings as carriers prep for Lunar New Year. No major equipment hurdles to highlight in the US. Certain inland US markets in the Midwest have a balance on equipment availability while the coastal US ports have an abundance of availability.
- Recommendation: Book 2-3 weeks prior to CRD on all coastal to Asia base port lanes, and book 3-4 weeks prior to CRD on all inland to Asia base and feeder port lanes.
North America → Europe
- Capacity, Congestion, and Equipment have all improved amid a continued drop in market demand, but rates have not fluctuated much.
- Most USEC to N. Europe (NEU) and Mediterranean (MED) services have low to medium capacity utilization levels with very limited space constraints.
- Gulf Coast to NEU and MED services continue to have very high (over 100%) utilization levels as the market in Q3 and early Q4.
- The USWC to NEU, MED services are still VERY limited in options and therefore utilization levels are artificially high. There is no positive outlook for the rest of Q4 and into Q1 for additional capacity on these lanes.
- Rates: The floating market rates are not fluctuating anywhere near as rapidly on the Transatlantic Eastbound (TAEB) trade as they are on other global trades. Rates are trending slightly downward MoM and QoQ on certain lanes.
- Space: Space is manageable with a slight improvement on CRD to ETD lead times from Q3 to Q4 significantly from 3-4 weeks to 2-3 weeks across most lanes.
- Capacity/Equipment: Carriers have reintroduced port calls in Savannah and Charleston on USEC to NEU services with a return to a regular, weekly schedule which will have an impact on space and rates into Q1. Carriers on the OCEAN alliances have introduced a new Gulf service to the MED which officially launched last week. There is no outlook for carriers to add capacity OR remove capacity on the WC to NEU, MED services. No major equipment hurdles to highlight in the US. Certain inland US markets in the Midwest have a balance on equipment availability while the coastal US ports have an abundance of availability.
- Recommendation: Book 2-3 weeks prior to CRD on all EC to NEU, MED lanes, book 3-4 weeks prior to CRD on all Gulf to NEU, MED lanes, book 4-5 weeks prior to CRD for all PSW to NEU lanes.
North America Vessel Dwell Times
Air Freight Market Update
- N. China: TPEB demand in the market is on the rise, and that trend is expected to continue through the Christmas holiday. Rates have also increased compared to the week prior. Far East Westbound (FEWB) demand and rates remain stable.
- S. China: The market is picking up and space is starting to become congested. We recommend placing bookings earlier in order to arrange quicker uplift. Both TPEB and FEWB rate levels have increased in response to the higher demand. Due to heavy snowstorms in Alaska, some freighter capacity has been canceled. The Chinese government recently announced an ease in Covid restrictions so cross-border traffic is expected to gradually resume.
- Taiwan: The market is normal with the exception of Los Angeles (LAX) capacity, which is still seeing space constraints. Carriers announced fuel decreases to 49TWD for long-haul flights, effective from 12/16.
- Korea: There is a small peak in demand to USWC before the winter holidays, however overall the market remains soft.
- SE Asia: The overall export markets in Southeast Asia continue to be soft. There is a trend of volumes switching back to ocean freight as reliability and rates stabilize, with clients opting to use air freight for more urgent requests.
- Demand out of Europe into main North American hubs has picked up slightly, as expected in the run up to the holidays.
- Capacity into main hubs is tighter due to higher demand for shorter transit times and arrivals before the holiday break.
- Staff shortages, strikes and unfavorable weather conditions in Amsterdam (AMS), Frankfurt (FRA) and London Heathrow (LHR) are expected to cause terminal congestion and delays.
- Export demand remains steady from all markets.
- US airports are running at a normal pace.
- Capacity is opening up further, especially into Europe.
- Rates remain stable week over week.
Trucking & Intermodal
- Due to inflation/soaring costs to operate trucking/barge/rail the GRI for 2023 is expected to be around 10-15% (excluding fuel surcharge). Dropping volumes will not affect this, as this is based on cost to operate and truck carriers barely have any margins.
- Capacity is still fragile despite declining container volumes caused by a continuous shortage of drivers and delayed delivery of newly ordered trucks.
- There is an increase of trucking carriers looking into alternative fuels (HVO, electric and hydrogen) to decrease CO2 footprint.
Import/Export Market Trends
- Congestion continues at Canadian ports and rail ramps. Yard utilization at Vancouver remains high; this congestion is partially due to ongoing congestion in Toronto and Montreal.
- Memphis, Dallas, and Chicago continue to see excessive rail dwell times and congestion, > 14 days.
- Savannah, Houston, and Oakland are seeing increased congestion, vessel bunching, and multiple vessels at anchor.
- Highway Diesel have dropped month over month across the board.
- East Coast ($5.336/gallon), Midwest ($5.108/gallon), and Gulf coast ($4.699/gallon)
- West Coast ($5.666/gallon), California ($6.006/gallon), and Rocky Mountain ($5.392/gallon)
- British Columbia, Quebec, and Ontario $5.875/gallon (~$7.980 CAD/gallon)
US Domestic Trucking Market Trends
- Truckload demand remains strong despite the headline-grabbing talks of a freight recession. All reputable and representative truckload demand indicators point to volumes being up year-over-year, not down.
- Dry van capacity tightened slightly as expected, although the number of carriers posting their equipment in search of loads is now 24% higher than last year, a sign that spot market capacity remains oversupplied as we passed the Thanksgiving peak.
- The national average linehaul rate of $1.77/mile is $0.28/mile lower than the top 50 dry van lanes based on the volume of loads moved, which averaged $2.05/mile last week.
- Spot truckload rates have fallen more than 40% since a January high.
Customs and Compliance News
USTR Extends 352 Section 301 Exclusions
The Office of the United States Trade Representative (USTR) announced Friday that it will extend 352 Section 301 exclusions, set to expire on December 31, until September 30, 2023. USTR initially reinstated the product exclusions on March 28, 2022, stating that the extension will align consideration of these exclusions with the ongoing comprehensive four-year review. The USTR will continue to accept public comments on the China Section 301 tariff actions and the exclusion process until January 17, 2023. If you are interested in submitting comments on the impact the Section 301 tariffs have had on your business, please reach out to Flexport’s Trade Advisory team at firstname.lastname@example.org.
FY23 Spending Bill Increases CBP Funding for Technology and Enforcement
On December 20, Congress released its omnibus spending bill for fiscal year 2023. The bill includes a total of $16.464 billion in base discretionary funding for Customs and Border Protection (CBP). Among the spending provisions for CBP related to trade, the bill provides $101m toward combating forced labor, an additional $2.5m to test implementation of blockchain and distributed ledger technologies to improve trade operations, and $20m for innovative technologies.
Freight Market News
According to The Economist, America’s biggest ports face a new kind of paralysis. Rather than too much cargo, like last year, ships are now bringing in too little. During the pandemic, supply chain congestion surged and ports were slow to disembark all ocean cargo. Contrast that with now, as ports are seeing a dramatic drop in imports, with west coast ports taking the worst hits. However, many expect west coast ports to rebound and overall shipping to grow once inflationary pressures subside, as Flexport CEO Dave Clark is quoted in the article, “People have short memories and cost usually wins.”
Flexport Research Updates
This week, three major central banks (the Fed, ECB, and the Bank of England) hiked their policy rates by 50 basis points as they raced to catch up with high inflation. This past week was remarkable in that the three central banks seemed to be marching in lockstep, even without any official overt coordination. So what does it mean? It shows that inflation is a transatlantic problem, even if the causes differ, and the de facto coordination should calm some of the swings we’ve seen recently in exchange rates. High rates are unfortunately here to stay, but economists hope they will begin falling by the end of 2023.
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 ↑ @ 9.1 days, FEWB ↑ @ 10.8 days.
Ocean Timeliness Indicator: TPEB — @ 69 days, FEWB ↓ @ 73 days.
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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.
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