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Market Update

Freight Market Update: April 26, 2022

Ocean and air freight rates and trends; customs and trade industry news plus Covid-19 impacts for the week of April 26, 2022.

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Ocean Freight Market Update

Asia → North America (TPEB)

  • Supply and demand remain in better balance on TPEB, although the future outlook is uncertain. Generally, demand remains lower than during the prolonged peak season seen during the height of the pandemic. How long this market dynamic will last is unclear, as a seasonal lull post-Lunar New Year is traditionally expected, as well as there are other uncertainties at play—changes in consumer spending patterns, economic trends, and Covid-19 related impacts. Severe congestion, equipment imbalances, sliding vessel schedules, port omissions, blank sailings, and higher fuel charges continue to pose difficulties.
  • Rates: Rate levels remain elevated relative to the pre-Covid market with softening in several pockets.
  • Space: Undercapacity, except in pockets.
  • Capacity/Equipment: Critical/Severe Undercapacity.
  • Recommendation: Book at least 2-4 weeks prior to CRD. Consider premium options. Be flexible in regard to equipment and routings. Check closely with suppliers to understand any Covid-related impacts or changes to production outputs and forecasts.

Asia → Europe (FEWB)

  • Disruptions continue to dominate the trade. The Shanghai lockdown and various other local restrictions across cities in East and North China are affecting factory production, warehousing and trucking availability. It is expected that there will likely be some port omissions and blank sailings announced by carriers as a response to recent developments. On the destination side in Europe there is impact due to congestion in several ports which is causing re-routings and further delays.
  • Rates: Rates remain at a high level but have been on a downward trend throughout March and April due to a slowdown in the market.
  • Space: Tight space situation for NAC but space available for FAK.
  • Capacity/Equipment: Equipment situation is somewhat improved due to lower exports out from Asia but there are no structural changes.
  • Recommendation: Book at least 2 to 3 weeks prior to CRD. Be flexible in regard to equipment. Plan taking into account that congestion may delay cargo.

Europe → North America (TAWB)

  • Congestion has shown some sign of improvement, mostly in the USWC while the USEC remains challenging.
  • Rates: Rates continue to increase as vessels are fully booked and capacity is still very tight with no new vessel planned to enter in the trade any time soon.
  • Space: Critical for both USEC and USWC due to ongoing congestion.
  • Capacity/Equipment: Capacity remains tight for both North Europe and Mediterranean services. Better equipment availability at port. Shortages remain at inland depots.
  • Recommendation: Book 5 or more weeks prior to CRD. Request premium service for higher reliability and no-roll guarantees.

Indian Subcontinent → North America

  • Equipment remains a limiting factor for loading cargo out of India. Colombo congestion has slightly improved however blanks sailings continue into May, thus reducing overall capacity and equipment rebalancing in the region.
  • Rates: Sustained at high levels for May.
  • Space: To the USWC space remains a challenge. Space to the USEC has opened up due to ease in demand after mid-April public holidays. However, ongoing USEC congestion at main ports of discharge such as Savannah and Charleston will continue to create schedule delays in the return trips back to the ISC region. These delays often result in port of loading omissions and blank sailings.
  • Equipment: Deficits are being reported across many ports in India. Most affected are the S/SE ports, Kolkata, and Inland container depots in North India.
  • Recommendation: Load via wet port and avoid Inland container depots when possible. ICDs are a chokepoint for containers which often leads to delays in SO release. Booking on some premium services will give you priority on equipment.

North America → Asia

  • Vessel arrivals and available capacity remain fluid for all USWC ports. The USEC continues to see challenges with vessel congestion and some vessel strings omitting Charlesotn and Savannah entirely. Erratic vessel schedules continue to cause significant challenges with posted earliest return dates and vessel cut-offs at the port.
  • Rates: Limited GRI activity announced for May.
  • Equipment: Deficits on containers and chassis continue to plague IPI origins. Availability for standard equipment at ports has not been an issue for most ports but carriers have advised of shortages on 40’s at the port of Oakland.
  • Recommendation: Please place bookings 4 weeks prior to vessel ETD.

North America → Europe

  • Significant congestion and vessel delays in Europe still remain in addition to the ongoing schedule issues for New York, Charleston, and Savannah that are now leading to bi-weekly port omissions. The port of Houston is also experiencing capacity constraints due to schedule delays and port congestion with one service being reduced from weekly to biweekly. US West Coast service to Europe is extremely tight due to void sailings and skipped ports caused by systematic delays. Pacific Northwest coverage for Europe is suspended indefinitely. All carriers have issued a booking stop for shipments to Ukraine, Russia, and Belarus.
  • Rates: No GRI announced for May.
  • Equipment: Deficits are still plaguing IPI origins. Availability for standard equipment at ports has not been an issue, but any special equipment is hard to come by.
  • Recommendation: Please place bookings 3 to 4 weeks in advance for East Coast/Gulf sailings and 6 weeks for Pacific Coast sailings.

North America Vessel Dwell Times

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Air Freight Market Update

Asia

  • N.China: Shanghai continues to undergo lockdown due to high amounts of Covid cases. Flight capacity has recovered slightly compared to last week, but the main bottleneck is a lack of trucking capacity. Despite this, airlines have increased rate levels as we head towards Golden Week.
  • S. China: Ex-South China the flight frequency has still not recovered due to the Covid situation and war conflict, however demand continues to pick up. Rates maintain at around the same levels as last week and the market is quite strong before the holiday.
  • Taiwan: The market is fairly stable this week. Capacity is a little tight due to the upcoming holiday but is overall still manageable.
  • Korea: TPEB space is tight ex-Korea mainly due to shipments being re-routed from North China to Korea as a result of the ongoing Covid lockdowns.
  • SE Asia: Demand ex-Thailand continues to be soft. Capacity on the TEPB trade lane may reduce during the upcoming Golden Week holiday. The market ex-Malaysia is still soft as a result of Ramadan, however capacity on the FEWB tradelane will increase starting this week. Demand ex-Vietnam continues to be weak. Rates levels ex-HAN have dropped slightly while ex-SGN rates remain similar to last week. Some FEWB capacity ex-HAN has been canceled due to the low demand in the market.

Europe

  • Demand continues to be steady, and the upcoming change in season is seeing an increase in air freight requests for inventory to be stocked for Summer. To ensure goods arrive quickly, consider smaller batches of cargo across multiple uplifts.
  • Rates are at a stable high with capacity constraints starting to ease with the introduction of the summer schedule, Jet fuel prices starting to decrease however the benefits will not be passed on till the market stabilises.
  • Freighter capacity is heavily reduced and booking to uplift window is approx 10-14 days.
  • Deferred routings are still providing a viable routing option if already tight lead times can take it. We also see cheaper options on the market to secondary hubs where airlines have regular passenger flights.
  • Terminal congestion is evident in LHR due to a backlog at Dover for ferry crossings. Cargo that tranships via Europe into LHR is causing short term spikes/dips in volume for these terminals resulting in backlogs. Additional flight cancellations EX TAO & PEK into LHR are causing capacity constraints.
  • For all trade lanes, advice is to place bookings early to secure best uplift options/routings. If the lead time can take, a deferred option via a secondary hub can always be a viable solution.

Americas

  • Demand remains high, but manageable. Origin dwell times of 3-5 days have been reported.
  • Most airlines have canceled their flights into PVG due to the current COVID-related lockdown.
  • Early bookings are highly suggested.
  • LAX/ORD/JFK ground-handlers are dealing with high volume considering the heavy export throughput.
  • Rates remain stable compared to the previous week.

Trucking & Intermodal

Americas

  • US Domestic Trucking
    • Demand is dropping, creating more capacity for the first time in quite a while. The Outbound Tender Volume Index has fallen below 14,000 to 13,783, and the Outbound Tender Rejection index has fallen to 16.10%. There are less tenders and providers are accepting more of their contracted freight.
    • The National DAT Load-to-Truck ratio has dropped to (4.44 loads per 1 truck), which represents the lowest LTT ratio that we have seen since January of 2021. While low, it is still nowhere near a balanced market, as a balanced market is represented by a LTT ratio closer to (2.5 to 1).
    • It remains a possibility that the market we are seeing is a return to seasonality, albeit a slightly delayed return that was impacted by severe winter weather and Omicron in January and February. And truly, the answer could be both, we could be seeing the market drop off as consumer spending patterns change. A highly fragmented carrier market remains which is highly susceptible to market-induced capacity swings.
    • The South East and Houston, TX markets are thought to be stronger than their surrounding market, particularly when the South East hits produce season in Mid-April/May Produce Season will cause a capacity crunch in these areas for dry van and especially reefer freight, causing spot rates to rise.
    • The Midwest is cooling rapidly. Chicago is falling below equilibrium at (1.58 to 1), Detroit (2.16), and Milwaukee, WI (2.44) also fell below equilibrium, and as a by-product, we should see spot rates accelerate their decline out of these markets. The North East cooled, with Elizabeth, NJ (4.56), Philadelphia, PA (3.46), Harrisburg, PA (4.20), and Baltimore, MD (4.24) continuing to inch down.
    • Plenty of markets increased as we continue to see some seasonality as Norfolk, VA (port market) hit 8.52 to 1, Miami, FL (port market) 6.56 to 1, Jacksonville, FL (port market) 8.24 to 1, and Los Angeles, CA moved back up to 6.24 to 1.
  • US Import/Export Trucking
    • Market Trends
      • Congestion continues across the majority of East Coast ports, however, some markets in recent weeks have seen a slowdown in inbound container volumes.
      • Limited warehouse receiving capacity continues to be an issue as inventory levels increase. Backlogged containers waiting to unload absorb valuable chassis equipment and yard space, which in turn disrupts trucking productivity.
      • Port of LA/LB approved a clean truck fee to be assessed on cargo owners beginning April 1, 2022. The plan is designed to expedite the introduction of zero-emission vehicles in the port complex.
      • The fee is $10 per TEU, or $20 for all containers longer than 20'
      • Profits raised from the fee will be used in part to provide direct grants to truckers for zero-emission vehicles.
      • Both new and existing cartage providers have doubled down on their air export service. Same-day pickups are consistently achieved in each of our major markets. We continue to build out the linehaul service to support expedited movement on the backhaul to our major gateways.
  • Q2 2022 Outlook
    • Volatility in FSC is expected to continue as Diesel prices remain unstable and on the raise.

Customs and Compliance News

CBP Pushes Further Updates in HTSUS related to Section 301 Exclusions

In a second round of updates related to the new Section 301 Exclusion Extension code, CBP announced that the exclusion subheading, 9903.88.67, would be available for 0505.10.0050, 8412.21.0045, 8483.50.9040, 8525.60.1010, and 8607.21.1000 starting on April 26, 2022. 9903.88.67 became available for filing on remaining HTS codes starting on April 12, 2022.

CBP Publishes Guide for Latest Updates to the ACE Portal Modernization.

On April 22, 2022, CBP published a guide on the use of updated Customs Form (CF) 28 (Request for Information), CF29 (Notice of Action), and CF4647 (Notice to Mark and/or Notice to Redeliver) in the Automated Commercial Environment (ACE). The guide shows how to access the forms and respond to CBP within the modernized ACE portal.

Factory Output News

  • Vietnam Budgets $1.5 billion to expand container fleet Source
  • Cambodia Automotive and electronics identified as key growth sectors Source
  • Indonesia Coal export shipments to Europe increased due to the Russia coal ban Source
  • Singapore After the completion of Finnish producer, Neste’s Tuas facility in 2023 Q1, Singapore will have the world’s largest sustainable aviation fuel production capacity Source
  • Phillipines Many US companies are expressing interest to expand business into the Philippines making it a point of transshipment Source

Freight Market News

Truckload Rates Expected to Plateau This Q2 According to SupplyChainDive, market forces are currently driving higher truck rates, but as Q2 progresses, truckload demand is expected to plateau and eventually decline. As spot rates dip, contract rates would likely remain elevated as the demand for produce shipping picks up this summer.

Blank Sailings Rise To Bolster Spot Rates According to The Loadstar, as export demand from China has declined and container spot rates will likely be impacted, carriers are rolling out more blank sailings. Loadstar has reported that export bookings for coming weeks have fallen by over a third as factories and warehouses remain closed and trucking remains limited.

Flexport Research Updates

Uphill Struggle, Downhill Stretch - Trucking’s Price Paradox The cost of trucking has hit a record yet there are concerns in the industry about the future. What’s led to the higher prices? Why might they fall? Is this a leading indicator for logistics more broadly? This report looks at a series of open source indicators for the trucking sector and finds a downturn could be nigh.

Economic Insights: Coal Facing Disruptions - EU Extends Russia Sanctions Why does coal matter for European supply chains? How significant are the new sanctions against Russian coal exports? Which industries might be affected and where else will the coal come from? This report considers the latest EU sanctions and finds that a wide range of industries may be affected, but the impact will vary among EU member states. Options for alternative sources are limited.

Weekly Economic Report: World Growth Slows In its latest projections for the global economy, the IMF downgraded economic growth and trade prospects for almost everyone. Key drivers of the gloomy outlook were the conflict in Ukraine, monetary tightening, less fiscal stimulus, a slowdown in China, and the ongoing pandemic.

Air Timeliness Indicator The Air Timeliness Indicator measures the amount of time taken to move airfreight along two major trade lanes from the point of consolidation to arrival at final destination. The latest indicator saw no change for the Transpacific Eastbound (TPEB) at 11.4 days, while the Far-East Westbound lane (FEWB) rose to its highest level since the end of February, hitting 10.4 days, potentially driven by networks fully adjusting to the changes in operations required by the conflict in Ukraine.

Ocean Timeliness Indicator The Ocean Timeliness Indicator similarly measures transit time for ocean freight along the same two trade lanes. In the past week TPEB increased for a third week to 112 days, while FEWB further fell from its peak two weeks ago, hitting 112 days. Both lanes saw decreases in delays for the first stage of their journeys. A combination of factory closures in Shenzhen and Shanghai combined with ports remaining open may be resulting in a degree of debottlenecking, but it should also be noted that there is some seasonality, with the Stage 1 index typically rising in the first few weeks of the year.

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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