Freight Market Update: December 22, 2020
Ocean and air freight rates and trends; customs and trade industry news plus Covid-19 impacts for the week of December 22, 2020.
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Ocean Freight Market Update
Asia → North America (Transpacific Eastbound)
- To end the year, rates remain steady at current levels.
- As carriers continue to grapple with equipment shortages throughout Asia, flexibility with equipment types and premium services remain the best way to get cargo moving.
- Capacity: Recommended advanced booking notice remains 21 days prior to CRD. Ningbo, Southeast Asia and Busan are among POLs with greatest equipment shortages.
- Equipment and space-release issues continue to push out planned departure: flag urgent cargo as early as possible to your CS team so they can present the best options available.
Asia → Europe (Far East Westbound)
- Rates: Increased
- GRI December 15: Implemented
- GRI January 1: Will be implemented
- Capacity: Recommend advance booking notice at least 21 days prior to CRD.
- Notes: Rates have increased significantly during December and will continue to do so in January in the lead up to CNY. There will be severe equipment shortages through CNY and equipment substitution is advised where relevant. Urgent shipments should be booked on premium directly, as even premium offerings have become more limited. There are widespread restrictions for UK cargo due to port congestion and haulage limitations and there will be further delays and port omissions. Service from feeder outports in East and South China has been suspended until further notice and shipments should be diverted to main ports.
Europe → North America (Transatlantic Westbound)
- Rates: North Europe: Increased; Mediterranean: Steady
- GRI December 15: Implemented ex-North Europe origins
- GRI January 1: Likely Implemented (North Europe and Med)
- Capacity: Recommend advanced booking notice 21 days prior to CRD.
- Notes: Premium options remain available for booking placed at shorter notice. The strong market is expected to continue through January as all carriers report vessel space fully utilised for the next 3-4 weeks. Expect sharp rate increases in Q1.
- Equipment shortages in Germany, Italy, Spain and Portugal in particular for 40 dry and reefer containers. Ongoing severe EQ shortages in Turkey.
- Port congestion: Rotterdam and Hamburg heavily congested. Some terminals are not accepting export containers for gate-in ahead of CY cutoff.
- Capacity development: No further blank sailings announced after week 2.
India → North America
- Rates: Steady
- GRI December 15: Rates extended with most carriers
- GRI January 1: Likely to be implemented
- Capacity: Tight due to limited equipment and feeder port omissions
- Equipment: Continues to be an issue—please make bookings in advance so we can plan for container availability at your local ICD/wet port. Equipment is especially limited in South India ports.
- Colombo congestion continues to impact the ISC feeder network. Carriers are continuing to redirect cargo to other transshipment ports such as Mundra or Port Klang.
North America → Asia
- GRI January 1 : Likely implemented for certain commodity segments.
- GRI January 15: Some carriers have given notice of a $100 per 40’ increase for mid-January.
- Capacity: Recommend advanced booking notice 7-10 days prior to CRD at Port.
- Capacity: Recommend advanced booking notice 10-14 days prior to CRD at Rail Ramp.
- Chassis availability is tight at most major ports and rail ramps. Recommend factoring in more lead time for truckers to procure chassis.
- Port of LA situation remains very fluid. Vessel schedule integrity is completely off which has led to vessel-bunching and smaller windows for vessel operations once imports are discharged from vessels.
- Pearl River barge service to be closed for January to avoid arrivals during the Chinese New Year. In response, all major carriers have ceased export bookings for these destinations.
North America → Europe
- Rates: Steady
- GRI January 1: Carriers announcing Congestion Surcharges as high as $150 per TEU for all shipments destined to the UK effective 1/1/2021.
- Capacity: Recommend advanced booking notice 7–10 days prior to CRD at port.
- Capacity: Recommend advanced booking notice 10–14 days prior to CRD at rail ramp.
- Chassis availability is tight at most major ports and rail ramps. Anticipate more lead time for truckers to procure chassis.
- UK port congestion which initially centered around Felixstowe is now affecting the ports of Southampton and London Gateway. There are extensive delays both in cargo arrival times at the port and container movement on the ground moving in and out of the ocean terminals.
Air Freight Market Update
- The peak season is continuing right up to Christmas with flights full and rates at elevated levels.
- The period between December 23 and Jan 1 is expected to be quiet as airlines and truckers take a well deserved break from the hectic pace of 2020.
- Post holiday, with strong demand and limited capacity continuing, the market is expected to pick right back up and continue that way until CNY in mid February. What’s more, the $908-billion Covid stimulus package will also be a “shot in the arm” for consumer confidence in the early part of 2021.
- The new Covid outbreaks are also disrupting crew availability, further restraining capacity and resulting in terminal congestion and delays at many US gateways, especially LAX.
- Flexport charters are on hiatus for the holiday period but will return ex PVG on January 2nd and ex HKG on January 4th.
- New Covid restrictions in the UK has resulted in numerous passenger flight cancellations in/out of the UK but freighters are continuing to operate. Expect capacity shortages and potential rate increases if the lockdowns persist.
- Capacity in the rest of Europe remains tight as we head into Christmas and shippers should expect slightly elevated transit times.
- Capacity ex USA to Europe, Asia and LATAM ahead of the holidays is a constraint. Last-minute shipments before the year closes will only move on Express rates.
- Despite the newly imposed lockdown, capacity into the U.K. is available on PAX freighters and some scheduled integrator flights.
- Terminals in the major airports (LAX/ORD/JFK) are dealing with elevated volumes and shortage of labour, causing delays in the breakdown and recovery of cargo at terminals.
Factory Output News
United States has added Chinese drone giant SZ DJI and top chip maker SMIC to its economic blacklist along with dozens of other Chinese companies. [Source]
Taiwan: Surging demand for products like laptops, tablets, and mobile phones in the U.S. is causing a global semiconductor shortage for big giants like Taiwan Semiconductor Manufacturing Co. (TSMC) and United Microelectronics (UMC) [Source]
Thailand: More than 10,000 people are set to be tested for COVID-19 in Samut Sakhon and nearby provinces including Samut Songkhram and Nakhon Pathom. This came after a record daily surge of over 500 infection cases, mostly attributed to migrant workers in a shrimp market in Samut Sakhon. [Source]
Heavy rain in northeastern Philippines left 8 dead and approximately 10,000 people evacuated. Floods inundated 14 towns in the Cagayan Valley and filled the Magat dam nearly to critical levels. [Source]
Myanmar plans to resume commercial flights to Thailand and Singapore on the 1st of January 2021 via Myanmar Airlines. [Source]
Indonesia: After its operational trial, a new port in the town of Subang, 140 km (90 miles) east of the capital Jakarta was inaugurated by the Indonesia President on 20th Dec. [Source]
Updates from Flexport's Customs & Compliance Team
Customs Proposes Revocation of Ruling on Empty Cosmetic Containers with Brushes
In the weekly Customs Bulletin (Vol 54, No. 48) published December 9th, Customs & Border Protection (CBP) proposed a revocation of two Customs ruling letters (NY I82716 & NY D88064) that would change the classification of empty cosmetic containers imported with brushes. Previously, under ruling NY I82716, empty cosmetic containers imported with brushes were determined to be classifiable under heading 9603.29.4090 (duty: 0.2 cents each, plus 7%). Upon revocation of the previous rulings, CBP’s new determination is that these empty containers with brushes belong under heading 3923.90.00 (duty: 3%). CBP is accepting written comment on these ruling revocations by January 8, 2021.
U.S. Labels Vietnam and Switzerland Currency Manipulators
On December 16th the U.S. Treasury Department issued a report that labeled Vietnam and Switzerland currency manipulators. According to the report, both countries met all three criteria assessed under the Trade Facilitation and Trade Enforcement Act of 2015 (TFTEA), namely a significant bilateral trade surplus with the U.S., a global current account surplus, and a pattern of persistent intervention in the foreign exchange market. As a result, the Treasury Department will commence bilateral engagement that will “include urging the development of a plan with specific policy actions to address the underlying causes of currency undervaluation and external imbalances.”
GSP & MTB Set to Expire December 31, 2020
Both the Generalized System of Preferences (GSP) and Miscellaneous Tariff Bill (MTB) are set to expire at the end of the year without any immediate plan for renewal. Even if Congress were to pass a retroactive renewal in 2021, many importers are likely to face increased duties in the new year.
Economic highlights from Flexport Chief Economist Dr. Phil Levy
- US retail sales fell by 1.1% from October to November (seasonally adjusted), though they were still up 4.1% from November 2019. For the year-over-year November comparison, the biggest subcategory gainers were nonstore retailers (29.2%), sporting goods & hobby (19.6%), and building materials and garden (18.7%). The biggest merchandise losers were department stores (-19.0%), gas stations (-17.1%), and clothing stores (-16.1%).
- US initial jobless claims rose for a second straight week and hit their highest level since early September.
- US industrial production climbed 0.4% in November, with manufacturing up 0.8%, driven by a 5.3% gain in motor vehicles and parts. Manufacturing in November was 3.8% below its pre-pandemic level.
- Chinese industrial production was up 6.9% from October to November. Retail sales also expanded.
Freight Market News
Holidays Exacerbate Pre-Brexit Congestion British ports are besieged by cargo pileups, idling ships, and lines of trucks as British companies race to stock up on goods before Brexit, reports the Wall Street Journal. A robust holiday season and the shift to e-commerce, caused by Covid-19, had already put pressure on space and manpower.
Ocean Carriers Introduce ‘Sliding’ In an attempt to cut costs related to schedule unreliability, some ocean carriers are scheduling buffers of up to a week into transit times. The Loadstar reports port congestion and blanked sailings may be already causing unplanned delays of this duration.
Vaccine Transport Takes Priority The distribution of the Covid-19 vaccines may create additional capacity crunches, but widespread impact is limited by strict temperature requirements. The Journal of Commerce reports that some services, like next-day air, will experience greater strain as vaccines take priority over other goods.
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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.