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Market Update

Freight Market Update: January 17, 2023

Ocean and air freight rates and trends; customs and trade industry news plus Covid-19 impacts for the week of January 17, 2023.

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European Freight Market Update Live | Tues, January 31 @ 16:00 CET / 15:00 GMT

Ocean Freight Market Update

Asia → North America (TPEB)

  • Transpacific Eastbound (TPEB) rates begin to level with the approach of Lunar New Year (LNY):
    • U.S.: The TPEB rates to the U.S. East Coast (USEC) and Gulf Coast continue to see softening while rates to the U.S. West Coast (USWC) are leveling off. Weeks 4 & 5 will see the bulk of the LNY blank sailings, with possible capacity tightening expected around this time.
    • Canada: Market and rate conditions are similar to the U.S. Vancouver continues to see stable vessel dwell counts (4 vessels) as well as berthing delays (6 days, 12 days for rail). The low TPEB demand is further playing a key role in clearing West Coast 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)

  • Space is full and there are a considerable amount of rollings in the lead up to LNY. Rates remain more or less stable compared to December but are expected to be under pressure again after the Lunar New Year period.
  • Rates: Extended into January and with some reductions for February.
  • Capacity/Equipment: Capacity is full to oversubscribed until LNY, after which there will be open space again.
  • Recommendation: Allow flexibility when planning your shipments due to anticipated congestion and delays.

Europe → North America (TAWB)

  • Space is available to both USEC and USWC ports as congestion has improved markedly and more capacity has entered the market. MSC & Maersk (2M) have also announced that even more capacity is set to enter the market on their North Europe and Mediterranean to North America services.
  • Rates: The downward trend is continuing. As capacity has increased and demand dips into negative territory, rates are set to decrease in the coming months.
  • Space: Due to the easing of congestion, space in USEC and USWC is becoming available.
  • 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 2-3 or more weeks prior to CRD. Request premium service for higher reliability and no-roll.

Indian Subcontinent → North America

  • LNY brings blanks sailings and equipment issues as lack of Chinese imports results in less containers being repositioned and causing blank sailings on shared TPEB-ISC services.
  • Rates: Continuing to drop week over week.
  • Space: Open
  • Capacity/Equipment: Capacity is being removed as carriers implement blank sailings. We are starting to see this happen on services to both the USEC and USWC.
  • 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 Vessel Dwell Times

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Air Freight Market Update

Asia

  • N. China: Demand is picking up before the holiday, leading to some rate level increases this week. Market rates will decrease quite a bit during the LNY holiday period, starting from Jan 21st and lasting until the end of the month.
  • S. China: Demand and rates have decreased and some factories have already begun taking off for LNY. With the lifting of all Covid measures in mainland China, cross-border traffic is expected to gradually resume.
  • Taiwan: The market is operating normally. The main thing to watch out for is high passenger demand before LNY which may result in potential cargo offload.
  • Korea: TPEB market demand is picking up before the long holiday while the Far East Westbound (FEWB) market is still trending downwards.
  • SE Asia: Demand ex-Southeast Asia overall remains low with capacity widely available with the exception of Hanoi, which is experiencing a pre-holiday rush and will require as much advance notice as possible.

Europe

  • Demand continues to maintain at lower levels.
  • Ample capacity available in the market for Transatlantic Westbound (TAWB) and FEWB.
  • Rates levels starting to decrease to normal Q1 Levels.
  • Ground operations at main European hubs are improving, with no major disruptions or delays expected.

Americas

  • 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

Europe

  • 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.

Americas

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)

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US Domestic Trucking Market Trends

  • The national Outbound Tender Rejection Index (OTRI) failed to rise above 6% during the week of Christmas for the first time in its five-year history.
  • Rapid demand erosion resulting from overstuffed inventories and eroding consumption coming out of an overstimulated goods economy are the main factors driving the weakening transportation markets. These conditions are forecast to persist through the first half of 2023 at a minimum.
  • With little to no disruption to carrier networks, the spot market will be filled with discounted freight in what is typically the slowest time of the year for domestic trucking.

Customs and Compliance News

U.S. and EU Sign Tariff Rate Quote Agreement

On January 17, the United States Trade Representative (USTR) announced the signing of the U.S.-EU Tariff Rate Quota (TRQ) Agreement. Once implemented, the Agreement will enable the United States to preserve its existing access to the EU market for various agricultural commodities following the United Kingdom’s exit from the EU on January 1, 2021.

Classification Change Finalized for Engine Components

Customs and Border Protection (CBP) issued its final Notice of Revocation reclassifying cast-iron cylinder heads and block castings with rust preventative coating under HTSUS 8409.99.10, rather than under HTSUS 8409.99.9190. The new classification will lower the duty rate for products from 2.5 percent to duty-free. The ruling is effective for merchandise entered or withdrawn from warehouse for consumption on or after March 5, 2023. For more information on how this classification change may impact your business, please reach out to advisory@flexport.com.

China Section 301 Comment Period Closes January 17

On January 17, the Office of the United States Trade Representative (USTR) will close its online portal for the submission of public comments regarding tariff actions in the section 301 investigation into China. Following its review of submitted public comments, USTR will evaluate whether to provide additional opportunities for public comment through additional written comments or through public hearings. Any further opportunities for public comment will be addressed in subsequent notices.

Freight Market News

Airfreight Rates Decline Ahead of Lunar New Year

According to The Loadstar, factories in China have begun closing in anticipation of next week’s Lunar New Year, which has prompted a decline of airfreight rates on major routes. With trade data indicating a dip in U.S. orders, they further forecast a softening of both demand and production.

Covid-19 Cases Impacts Chinese Factories

The Chinese government has started to scale back its zero-Covid policy—which it has strictly enforced for almost three years, as reported by Supply Chain Dive. This change has led to a sharp rise in Covid cases, with cases rising over 67% in China and leaving factories short-staffed and unable to maintain normal production schedules.

Flexport Research Updates

Weekly Economic Report: Growth Downgrade

Despite rising interest rates—expected to constrain growth—the World Bank’s forecast for global trade volumes remains positive with 1.6% Growth predicted for 2023, representing a drop of 2.7% from the estimates of 6 months ago. The World Bank’s report calls for various measures to counter these impacts, including more access to trade finance, trade facilitation through deals such as customs agreements, and a reduction in arbitrary barriers to imports and exports.

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Air Timeliness Indicator: TPEB ↓ @ 9.3 days, FEWB ↑ @ 10.3 days.

Ocean Timeliness Indicator: TPEB ↓ @ 68 days, FEWB ~ @ 74 days.

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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