Freight Market Update: June 1, 2021
Ocean and air freight rates and trends; customs and trade industry news plus Covid-19 impacts for the week of June 1, 2021.
6/9/2021 - [Webinar] - Logistics Rewired: How to Build the Right Modal Mix When Space is Tight
Booking air when you can’t get ocean space is an obvious choice, but how do you do that strategically and efficiently? Join industry and Flexport experts for advice on creating a smart modal mix that supports your supply chain strategy and goals. In this Part II of the practical education series that started with “How to manage up when freight constraints rise,” you’ll learn actionable advice for immediate use. [Register now].
Ocean Freight Market Update
Asia → North America (Transpacific Eastbound)
- Shipment timelines continue to get pushed out as delays grow on every shipment leg. Capacity constraints along with limitations at both origin and destination continue to push out transit times across all lanes and from all origins. COVID outbreaks at origin (notably at the port of Yantian and countrywide lockdown in Malaysia) likely to result in vessel diversions, further blank sailings and upward pressure on rates.
- Rates June 1 GRI implemented
- Space Critical
- Capacity/Equipment Critical / severe under capacity
Asia → Europe (Far East Westbound)
- Space and equipment crunch continues. Market demand is exceeding supply. There are more blank sailings coming up in June and no improvement in equipment status. Carriers have a sizable backlog and are not able to accommodate their booking intake. Yantian port restrictions and congestion are causing further disruption as well.
- Rates Significant increase on June 1st and further increase on June 15th
- Space Extremely tight space situation
- Capacity/Equipment Severe equipment shortage across all Asia origins
- Recommendation Advance booking of at least 3 weeks prior CRD. Consider the limited premium options. Adopt flexibility on equipment substitution.
Europe → North America (TAWB)
- Space remains extremely tight. Demand is expected to hold steady and high through the summer to replenish inventories as consumer spending will continue to rise.
- Rates Hefty increase will apply in June. First indications for July show further significant increases.
- Space High demand on all services. Vessels are overbooked more than a month out.
- Capacity/Equipment Capacity is impacted by blank sailings and port omissions made by carriers to get their schedules back in order. Falling water levels on the St. Lawrence river is forcing carriers to reduce the overall loading capacity, which negatively impacts available capacity to Canada and the US-Midwest. Better equipment availability at origin ports, but shortages at inland depots will continue in the mid-term.
- Recommendation Recommend booking 5 or more weeks prior to Cargo Ready Date. Use Premium products for urgent cargo that needs higher reliability. Allow flexibility in routing and empty pick up from the port.
- Read More Container space premiums come to fore on trans-Atlantic trade
India → North America
- Blank sailings due to schedule reliability, pandemic, and natural disasters continue to affect capacity out of the ISC region. Cyclone Tauktae shutdown port operations for about 48 hours before returning back to service. Port Hazira expected to come back online later this evening after a week-long power outage. Another tropical cyclone, Cyclone Yaas, made landfall last week and is causing operational delays. Demand also continues to outweigh capacity, similarly to tradelanes like TPEB, which ISC relies on for shipments to the USWC.
- Rates 1st half of June GRI Implemented
- Space Tight to USEC and USWC
- Capacity/Equipment Equipment shortages across most ports in ISC and particularly in South India
- Recommendation Use premiums on urgent shipments.
North America → Asia
- Vessel Delays and Void sailings continue to diminish available capacity. US West Coast seeing the most pronounced impact from this lost capacity. As carriers prioritize moving their empties back, it compounds the situation.
- Rates - Anticipating quarterly BAF levels will increase for July 1. GRI advisories mostly limited to reefer shipments at this time.
- Space Tight from US East and West Coast. WIth a new service launching the US Gulf will increase in capacity a good deal.
- Capacity/Equipment Capacity tight from US East and West Coast. Equipment and Chassis tight at most ports and all ramps.
- Recommendation Book 4 weeks out.
North America → Europe
- US and Europe port congestion diminish available capacity. Ocean carriers implement numerous port omissions to make up vessel schedules, causing a new set of backlogs.
- Rates Steady, but with a July 1 BAF change, rate levels should see an uptick.
- Space Ocean carriers are now implementing allocations off the East Coast to ensure they honor the correct commitment levels.
- Capacity/Equipment Capacity is being more tightly managed. Equipment as US East Coast ports available but rail ramps are tight.
- Recommendation Suggest 4 weeks lead time on bookings from the US East Coast and 5-6 weeks where possible for the US West Coast.
Air Freight Market Update
- European export demand shows continued strength to the Americas and Asia. Space to the U.S. West Coast remains constrained. No meaningful capacity into North America was added over the past week. Space to Asia remains very well utilized, especially to China and Japan.
- Space to India and Bangladesh is very constrained, due to aid and relief shipments into the COVID-struck region.
- Major airport hubs, as well as secondary airports in Europe are reporting normal throughput for air imports and air exports.
- Export capacity remains well utilized due to continued lack of belly capacity. It can take 2-3 days from booking to uplift into key European destinations. Capacity from West Coast gateways is the most constrained to Europe, while the Midwest and East Coast are manageable. Capacity from the West Coast to Asia is filling quickly with dry cargo and perishables.
- Space to India and Bangladesh are very constrained, due to aid and relief shipments into the COVID-struck region—currently space is booked out until early June to India
- US and European carriers have not added meaningful capacity on their transatlantic routes as they wait for details of the newly proposed E.U. travel regulations for summer.
- With a high number of freighter flights from Asia and Europe, LAX and ORD ground handlers facing backlogs have started to use off-airport facilities to manage the flood of cargo. Ground handlers are reportedly 3-6 days behind in breaking down freight from arriving flights.
- Trucking remains scarce for airport recoveries and local deliveries, especially on the US West Coast.
- Perishable season kicked off, but not as strongly as anticipated. Rates off the WC to Asia declined as a result from the LAX market and capacity to Asia is very manageable.
Updates from Flexport's Customs & Compliance Team
USTR publishes FAQs to prevent Section 301 scams
The Office of the USTR released a list of FAQs regarding actions the USTR takes on Section 301 tariffs, clarifying what to look out for if a suspicious party makes contact in regards to tariffs. If a suspicious party has contacted an importer, the USTR encourages them to take action in the steps outlined on the webpage.
USTR has candid call with Chinese counterpart
On May 26, USTR Katherine Tai had a virtual meeting with her Chinese counterpart, Vice Premier Liu He, discussing the Biden Administration’s prioritization of a “worker-centric” trade policy and the USTR’s ongoing review of US-China trade relations. The Office of the USTR was ambiguous on further details of specific policy developments for trade and customs related to China.
CBP issues new WRO to combat forced labor in fishing
Highlighting the wide scope of withhold release orders (WROs) made to clamp down on products suspected to be made with forced labor, CBP issued a WRO against the full fleet and end products coming from Dalian Ocean Fishing. CBP found the company violated all eleven of the International Labour Organization’s indicators of forced labor, covering wages, living conditions, and abuse.
Factory Output News
China The price of raw materials and farm goods have increased significantly in the past year. To help factories and power plants, the Chinese government has made an effort to limit commodity prices. [Source]
Japan Japanese health ministry approves Pfizer COVID-19 vaccine for 12 to 15-year-olds. Japan has received enough Pfizer vaccines for 97 million people [Source]
Vietnam Ho Chi Minh starts social distancing measures from May 31 for 15 days to curb the spread of COVID-19. [Source]
Cambodia Kralanh market will be closed for two weeks from May 30 to June 12 to prevent Covid’s spread. [Source]
Thailand US$16 billion will be borrowed to finance new economic measures to help smaller firms and assist tourism. [Source]
Malaysia Malaysia enters a total lockdown from Jun 1 to June 14. Only essential service sectors such as healthcare, telecommunications and media, food and beverages, are allowed to operate. Some manufacturing sectors are allowed to continue to operate at 60% capacity. [Source]
Philippines Covid restrictions expected to ease in Manila as infections fall in the capital, but cases rise elsewhere [Source]
France restricts entry from the UK. To curb the spread of COVID-19 variants, European nationals, French residents and those travelling for essential reasons are the only travellers permitted to enter France from the UK. [Source]
India Many States like Kerala, Tamil Nadu, Maharashtra and Goa have extended lockdown despite recording the lowest case (165,553 of Covid-19 in 46 days. [Source]
Bangladesh has extended its Covid-19 Lockdown to June 6th from its original expiration date of May 30th. [Source]
Freight Market News
Shipping Industry Awaits Clean Fuel Consensus Industry agreements to cut carbon emissions in half by 2050, compared with 2008, still feel out of reach as shipping executives weigh their fuel options. The Wall Street Journal reports that, since cargo ships are expected to last 25 years or more, new ships need to start meeting sustainability requirements now. With no consensus on which clean fuel will power the industry through the 21st century, that’s still not possible.
Stranded Seafarer Numbers Rise While calls to let seafarers disembark at the height of the Covid pandemic were partially answered, new regional spikes in infection rates are still keeping workers onboard past their contract expiration dates. The Maritime Executive reports the latest data release shows the number of seafarers affected in May has risen by 24% over April.
Autonomous Truck Travels Silk Road A self-driving truck has accomplished a round trip on China’s Silk Road. Transport Topics reports the truck encountered traffic, steep uphills and downhills, tunnels, construction, S-curves, undivided highways, a sandstorm, and more.
US Rail Slashes Free Pickup Times US railroad companies are tightening their timelines to encourage quicker container and chassis turns at inland ramps. The Journal of Commerce reports narrower windows for free pickup may result in higher demurrage fees and additional strain on already stressed trucking companies.
Economic highlights from Flexport Chief Economist Dr. Phil Levy
April Inflation Measures Rise
April inflation measures in the US showed rising prices, however you cut it. Among the ways to cut it, one could look at the one-month price rise in a Personal Consumption Expenditure (PCE) index and extrapolate it to a full year.
That showed 7.5% inflation for the full index, 8.3% for a core version (excluding food and energy) and 2.4% for a “trimmed means” version favored by the Fed.
If one extrapolated the last six months instead, the corresponding rates would be 4.3%, 3.4%, and 1.8%. All but the last exceeded the Fed’s target for a 2% average.
Germany reported May inflation at a 2.4% annual rate, above the European Central Bank’s target of 2%.
Personal Consumption Falls
Personal consumption did not keep up with inflation in April, falling 0.1% in real terms.
Consumption of durable goods fell 0.1% from March, nondurables fell 1.8%, and services rose 0.5%.
Each category was still up from February.
US Exports Rise in April
US exports rose in April, up 1.2% from March to $144.7b. Imports were down 2.2% to $229.9bn.
WTO Shows Strong Trade Ahead
The Global Goods Trade Indicator is booming. The WTO measure predicts strong trade upcoming.
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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.