Market Update

Freight Market Update: October 6, 2020

Ocean and air freight rates and trends; customs and trade industry news plus Covid-19 impacts for the week of October 6, 2020.

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Ocean Freight Market Update


Asia → North America (Transpacific Eastbound)

  • Rates: Steady
  • GRI October 1: Waived
  • GRI October 15: Expecting further reduction
  • Capacity: 8.4% of total TPEB capacity will be removed in first half of Oct; In the second half of Oct, capacity will return closer to 100%.
  • Notes: Q4 is traditionally slack season, following the Golden Week holiday in Asia; Services will start opening up towards the back end of Oct; Expecting another $100 - $200 in rate reductions before 10/14 and likely in week 42.
  • PRN - CMA: 40GP/40HQ shortage; HMM / Zim: 40GP shortage, can use 40HQ substitute 40GP
  • Shanghai - ZIM: 40HC EQ shortage; HLCU: 40/ H0HC EQ shortage
  • PRS - CMA: shortage for 40HQ & 45HQ with EIR printing control; supply from outports are extremely limited; COSCO: shortage of 40HQ & 45HQ; ONE: no 40GP supply

Asia → Europe (Far East Westbound)

  • Rates: Increased
  • GRI October 1: Partially Implemented
  • GRI October 15: Likely Implemented
  • Capacity: Recommend advance booking notice at least 21 days prior to CRD
  • Notes: China is currently on Golden Week holidays. It would normally be a slack period afterwards, but this year, market space is expected to be strong until end of October. Carriers are removing roughly 38% and 18% of total capacity in weeks 41 and 42 respectively, so space will be tight. From week 43, the blank sailing ratio will be back at around 13% again. Recommend equipment substitution where possible (40’ST and 40’NOR instead of 40’HC, the size in shortest supply). Severe congestion and operational problems in Felixstowe. Suggest to divert shipments to Southampton, if acceptable.

Europe → North America (Transatlantic Westbound)

  • Rates: Increased
  • GRI October 1: Implemented
  • GRI October 15: None
  • Capacity: Recommend advanced booking notice 21 days prior to CRD
  • Notes: Strong market outlook with full vessels until the end of October. Recommend booking as early as possible and request premium service for urgent shipments. No further blank sailings have been announced after week 43.

India → North America

  • Rates: Indamex: Steady; USWC: Steady; USEC: Steady
  • GRI October 1: Not Implemented
  • GRI October 15: Not Expected
  • Capacity: Recommend advanced booking notice 14 days prior to CRD
  • Notes: Equipment shortages persist across India especially at local ICD’s. Space is still very tight due to demand across the Asia / ISC region.

North America → Asia

  • Rates: Steady
  • GRI October 1: None, however BAF adjustments went into effect.
  • GRI October 15: None
  • Capacity: Recommend advanced booking notice 7 to 10 days prior to CRD at Port
  • Capacity: Recommend advanced booking notice 10 to 14 days prior to CRD at Rail Ramp
  • Notes: Chassis availability is tight at most major ports and rail ramps and would recommend sufficient lead time for truckers to procure chassis.

North America → Europe

  • Rates: Steady
  • GRI October 1: None, however BAF adjustments went into effect.
  • GRI October 15: None
  • Capacity: Recommend advanced booking notice 7 to 10 days prior to CRD at Port
  • Capacity: Recommend advanced booking notice 10 to 14 days prior to CRD at Rail Ramp
  • Notes: Chassis availability is tight at most major ports and rail ramps and would recommend sufficient lead time for truckers to procure chassis.

Air Freight Market Update


Asia

  • Mainland China is still on Golden Week holiday, so the market is effectively on hiatus this week. It is anticipated that demand will surge post-holiday with strong demand projections from many large shippers combined with product launches.
  • South China/HKG market stayed relatively strong through the shortened Golden Week holiday in HKG. Rates are expected to keep climbing through the peak season.
  • Markets in TPE, BKK, HAN, SGN, KUL, and PEN are strong heading into the busiest time of the year. Capacity will be very scarce for the balance of the year, especially for major projects.

Americas

  • US Outbound rates to Asia have been reduced slightly for October, especially from the Midwest and West Coast.
  • Freighter capacity to Asia is limited this week due to Golden Week cancellations.
  • Transatlantic rates are under a bit of pressure as airlines have recently introduced some new passenger flights. The added capacity is resulting in softer yields. Expect this to change in the coming two weeks as we head into peak season with strong projected e-commerce volumes.

Europe

  • On the FEWB, we expect increases in demand and rates after Golden Week. Currently during Golden Week, rather quiet and not much volume.
  • On the Transatlantic, the situation remains the same with minor capacity additions and rates at a slightly increasing level on selected port-pairs.

Factory Output News


Japan and South Korea Revise Travel Rules Nikkei Asia reports in its live Coronavirus update thread that Japan and South Korea have agreed to exempt business travelers with a negative Covid-19 test and private medical insurance from quarantine regulations.

Google Pulls Back on Office Space While abandoning its plans for a new office space in Dublin, Google confirms its commitment to its 8000 employees there, reports CNBC. The choice reflects the greater trend towards downsizing commercial property as work from wifi increases in popularity.

ISM Reports Growth The Institute for Supply Management (ISM) published its Manufacturing Report on Business for the month of September, showing New Export Orders Index up 1 percentage point to 54.3%. This marks the third consecutive month of growth, reaching its highest level since September 2018 (56%).


Updates from Flexport's Customs & Compliance Team


Trump Administration Launches Vietnam Probe

The Sec. 301 investigation investigates unfair currency practices and illegal use of timber. It could ultimately provide a legal basis for new Sec. 301 tariffs on Vietnam, though not likely anytime soon.

Importer’s Cotton Assessment Fee Reduced

Effective December 4, 2020, the Agricultural Marketing Service (AMS) is amending the importer’s cotton assessment fee, or “Cotton Fee,” a fee levied on imported cotton for use by the Cotton Research and Promotion Program. The assessment fee will be decreased from $0.012222 per kg to $0.011562 per kg.

Push for a US-Taiwan Trade Agreement

On October 1, US Trade Representative Robert Lighthizer received a letter with signatures from 50 US senators, urging him to “begin the formal process of negotiating a comprehensive trade agreement with Taiwan.” In it, they argue that Taiwan has a proven history as a strong trading partner with the US, and now is an opportune time to diversify national supply chains away from China.

Department of Homeland Security Audits Entry Reconciliation Program

An audit by the Department of Homeland Security concluded that Customs “compromised the integrity of the Entry Reconciliation Program and . . . may have put approximately $751 million of revenue, in the form of reconciliation refunds, at risk.” The agency offered four recommendations. Customs did not concur with recommendation 1.


Economic Highlights from Flexport Chief Economist Dr. Phil Levy


  • US employment numbers disappoint. The September data showed an increase of 661K jobs over the month before and a decline in the unemployment rate to 7.9%. Each indicated a slowing recovery and left the economy well short of February, when there were 10.7m more jobs and 3.5% unemployment.
    • The unemployment rate only counts workers actively looking for jobs. The labor force participation rate decreased by 0.3% in September. Of the 1.1m workers age 20 and over who left the workforce in the month, over 800k were women.
    • The number of long-term unemployed (27 weeks or more) increased by 781k to 2.4m. This is not only painful for the workers, but can presage a slower recovery.
    • In a separate report, weekly unemployment insurance claims were 837k, the lowest level since March, but historically very high.
  • Long-run growth prediction remains weak. As part of its forecast, the Congressional Budget Office predicted real annual GDP growth at 1.6% from 2020-2050 vs. 2.5% from 1990-2019.
  • Germany experienced deflation as prices fell 0.4% in September, the most in five years. Deflation generally reflects economic slowing. It is particularly difficult to counteract, with the ECB already adopting negative interest rates.
  • Chinese manufacturing showed modest expansion in September data.

Freight Market News


IMO Fields Cyberattack The International Maritime Organization experienced interruption of its public website and internal systems after a cyberattack. Bloomberg reports the attack comes on the heels of a separate cyberattack in the same week on one of the world’s largest container liners, although they don’t appear to be related.

Imports Flood US Despite Pandemic After rocky second and third quarters, a surge of imports is hitting US shores as part of a major restocking cycle, according to American Shipper. Although inventory-to-sales ratios are expected to remain low, container lessors are seeing strong demand into 2021 and container factories are sold out.

Warehouse Competition Is On The Wall Street Journal reports the rush at the pandemic’s start to secure warehouse space for e-commerce has ramped up as a result of current trends towards maintaining high safety stock.


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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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