Market Update

Freight Market Update: January 19, 2021

Ocean and air freight rates and trends; customs and trade industry news plus Covid-19 impacts for the week of January 19, 2021.

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For a close look at what’s next for the UK-EU trading relationship and its practical effects, save your spot at this Thursday's webinar: Beyond Brexit: What’s Next for the UK. Then on 1/26, join Lars Jenson of SeaIntelligence and Flexport experts for What Now? Ocean Market Predictions for 2021.


Ocean Freight Market Update


Asia → North America (Transpacific Eastbound)

  • Rates: Steady
  • GRI January 15: Soft / not implemented, depending on lane and carrier.
  • Capacity: Recommend advance booking notice at least 21 days prior to CRD.
  • Notes: Premium market remains the best chance of securing equipment, although even premium services are starting to implement caps and are facing the same equipment shortages found with standard FAK services.

Asia → Europe (Far East Westbound)

  • Rates: Increased
  • GRI January 1: Implemented
  • GRI January 15: Partially implemented (some extensions by carriers)
  • Capacity: Recommend advance booking notice at least 21 days prior to CRD.
  • Notes: Rates have increased significantly during December and January and will remain at a high level until at least Chinese New Year (CNY). The severe equipment shortage has not improved and will be a major challenge through CNY. It is still necessary to be flexible on equipment substitution. 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. Shipments from feeder ports in China should be diverted to main ports instead.

Europe → North America (Transatlantic Westbound)

  • Rates: North Europe: Increased; Mediterranean: Increased
  • GRI January 15: Implemented (North Europe and Med)
  • GRI February 1: Likely Implemented
  • 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 the end of February as carriers report full vessels 3-4 weeks ahead of ETD. Expect further rate increases in February due to equipment shortages, higher bunker prices and continued strong demand outlook.
  • Equipment shortages in Germany, Italy, Spain and Portugal in particular for 40’ dry and reefer containers. Ongoing severe shortages in Turkey.
  • Port congestion: UK congestion and vessel delays are causing vessel slides and cut and run in North Europe base ports. No easing in sight for North America West Coast ports congestion.
  • Capacity development: Upcoming blank sailings by THEA in week 5 on the AL1 service (approx. 5% weekly capacity reduction).

India → North America

Rates: Steady GRI January 15: Soft implementation—most carriers extended rates GRI February 1: Expected Capacity: Space is full and rolling to both USEC and USWC. Equipment: Continues to be an issue—please make bookings in advance so freight forwarders can plan for container availability at your local ICD/wet port. Consider moving 20GP instead of 40GP/HC. Recommend utilizing premium services to secure equipment faster. Demand is expected to increase through Q1 as we approach the end of the Indian fiscal year.

North America → Asia

  • Rates: Increasing
  • GRI January 15: Some mitigation on the GRI levels for mid-January by roughly 50% of announced levels.
  • GRI February 1: Initial advisory is for a significant increase for all US origins to Asia with larger increases for Indian Subcontinent and exempt commodities to Southeast Asia.
  • 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 containers to be delivered.
  • Suspension of bookings for South China destinations currently in place to avoid arrival during CNY.

North America → Europe

  • Rates: Steady—Exception being the U.K. where another carrier has announced a Congestion Surcharge to be implemented in February.
  • 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 is still impacting vessel operations and the delays are now impacting arrival times at the ports of Rotterdam and Antwerp.

Air Freight Market Update


Asia

  • After a sluggish start to the year, the airfreight market on both the FEWB and TPEB trade lanes is gathering steam and flights are full. We expect a decent peak prior to the start of the CNY holiday.
  • More and more shippers have announced they will be manufacturing through the holiday as the Chinese government discourages workers from traveling home due to the surging Covid cases in many parts of China. This could create backlogs during CNY as large numbers of freighter flights have been cancelled weeks ago.
  • Post CNY, the market is expected to be robust as a result of inventory replenishment and an ocean market that will continue to be heavily congested. The impact on yields is still unclear, but we anticipate rates staying at a higher level as we close out Q1.

Europe

  • Capacity ex Europe to Asia, North and South America is available. The U.K. still appears to be a bottleneck, but transit via manland E.U. is improving.
  • Main airports in E.U. are fully operational and continue to show strong demand for exports out of the E.U. to the U.S. and LATAM driven by manufacturing and pharma.
  • All airports are operational and do not report any backlogs.

Americas

  • TPWB trade is stable into all Asia hubs and balanced between capacity and underlying demand.
  • LATAM SB has capacity availability and only some destinations (mainly Central America) are still constrained.
  • TAEB capacity is available to Continental Europe. The U.K. remains a challenge but integrators and a few freighter operators are providing capacity, while PAX capacity is almost down to zero.

Factory Output News

China reported 144 newly confirmed cases, including 135 local cases (mainly in Hebei (90) and Heilongjiang (43) province) and 9 imported cases. [source]

China Foxconn announced joint venture with Zhejiang Heely Holding Group, breaking into the Chinese electric vehicle market [source]

Vietnam has given Foxconn licence to build a $270m plant to build tablets and laptops in the northern province of Bac Giang. [source]

Malaysia’s government announced further restrictions on 5 states and 3 federal territories under the MCO for 2 weeks. [source]

Indonesia Earthquake hits island of Sulawesi on Friday (Jan 15) with at least 42 dead and more than 300 buildings damaged. [source]

The Japanese government will assist Cambodia to set up and test an automated customs clearance system designed to speed up cargo clearance time in a major port. [source]

Pakistan approves China's Sinopharm coronavirus vaccine as the country faces a new wave of coronavirus infections. [source]

Updates from Flexport's Customs & Compliance Team

WRO on Xinjiang Cotton and Tomatoes

On January 13th, the U.S. Customs & Border Protection’s (CBP) announced a withhold and release order (WRO) on cotton products and tomato products produced in China’s Xinjiang Uyghur Autonomous Region and that CBP would detain all such products at any U.S. port or entry. The agency identified several forced labor indicators in its investigations leading up to the issuing of the WRO, including: debt bondage, restriction of movement, isolation, intimidation and threats, withholding of wages, and abusive living and working conditions. This is the fourth WRO that CBP has issued since the beginning of Fiscal Year 2021, and the second on products originating in Xinjiang.

USTR Investigation Finds Vietnam Engaged in Currency Manipulation

On January 15th, the office U.S. Trade Representative (USTR) released a report and accompanying notice summarizing the findings of its investigations into currency manipulation by Vietnam. The USTR’s report has determined that Vietnam’s “acts, policies, and practices related to currency valuation..are unreasonable and burden or restrict U.S. commerce, and thus actionable under Section 301.” However in a press release published the same day, the agency said it “is not taking any specific actions in connection with the findings at this time but will continue to evaluate all available options.”


Economic highlights from Flexport Chief Economist Dr. Phil Levy

  • China’s economy grows. China announced 2020 GDP growth of 2.3% overall and a 6.5% rate in Q4. The 2020 growth was China’s slowest in 40 years, but contrasts with expected shrinkage in most major economies around the globe. The latest quarterly growth was the fastest since 2018.
  • Initial US weekly jobless claims climb to 965K, a 23% increase from the week before and the highest weekly number since August.
  • US retail sales drop in December. The 0.7% fall was the third straight monthly decline, but sales were still up 2.9% for the year. Though nonstore retailers fell 5.8% for the month, their sales were up 19.2% over December 2019.
    • The biggest annual declines were places for food and drink (-21.2%), electronics and appliances (-16.6%), and clothing stores (-16.0%). The biggest annual increases were building material and garden (17.0%) and sporting goods (15.2%).
  • US manufacturing recovery continues as production rose for the 8th straight month, up 0.9% in December. It remained 2.8% below the December 2019 figure.
  • US prices tick up. The broad Consumer Price Index increased 0.4% in December, up from November. The Producer Price Index, which can serve as a better measure of tradable goods prices, increased 0.3% for the month. For 2020, CPI was up 1.4% and PPI 0.8%, notably below longer-term expectations.

Freight Market News


OECD Weighs Global Tax for Shipping The Organization for Economic Cooperation and Development has released plans for a global minimum tax for multinational enterprises, reports the Wall Street Journal. Whether or not it will apply to shipping companies is still under consideration.

General Average May Not Apply in ONE Crash As the removal of damaged containers from the 14,000-TEU ONE Apus continues in Kobe, Japan, The Loadstar reports an insurance declaration of General Average may not be as likely as originally thought.

Dozens of Ships Idle off West Coast Ports A spike in import volumes is causing a major traffic jam in the waters outside Los Angeles and surrounding ports. American Shipper reports nearby usable anchorages are filling fast with reports of 35 or more ships offshore.


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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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