Freight Market Update: July 1, 2020
Ocean and air freight rates and trends; customs and trade industry news plus COVID-19 impacts for the week of June 24, 2020.
How will demand recover from COVID-19? And how can you ensure your cargo is moving to keep up with it? Visit Flexport’s COVID-19 Trade Insights for information and analysis.
Want to receive our weekly Market Update via email? Subscribe here.
Ocean Freight Market Update
Air Freight Market Update
Freight Market News
Long-Term Ocean Contracts Decline Rolling short-term deals that allow frequent renegotiation are gaining in popularity as the balance between ocean capacity and rates remains volatile. According to The Loadstar, a robust spot market may be a silver lining for carriers in the wake of initial COVID-19 pandemonium.
Shipowners Slow Decarbonization The Wall Street Journal reports that three-quarters of European Community Shipowners’ Associations members are reducing or halting decarbonization efforts, despite an April commitment to increase emission reduction goals, as COVID-19 economic effects challenge shipowners to stay afloat.
Meanwhile, this week, Flexport Chief Economist Dr. Phil Levy noted the following economic highlights:
- IMF gets gloomier. The International Monetary Fund lowered its World Economic Outlook from the forecast put out in April. Global GDP is now predicted to fall 4.9% in 2020 and grow 5.4% in 2021, down 1.9 and 0.4 percentage points respectively from two months ago.
- The IMF said Q1 GDP had been worse than expected in most countries, with notable major-economy exceptions of China, Germany, and Japan.
- Trade drop continues. The Census reported US May imports down 1.2% from April and down 22.9% from May of 2019. This covers the month beyond the chart. US exports were down 5.8% from April and 34.9% from the year before. The biggest component of the drop, for both imports and exports, was automotive.
- US initial jobless claims remain high. The weekly number of new claims was 1.48m, roughly 100K above the median forecast, according to one survey. This marked the 14th straight week over 1m, casting doubt on hopes for a sharp economic rebound.
- One study estimates that 32-42% of COVID-induced layoffs will be permanent.
- US shows signs of bottoming. The IHS Markit Composite US Purchasing Managers Index was 46.8 in June, up from 37.0 in May. While numbers below 50 indicate contraction, this was the strongest number since February.
New Tariffs Proposed on $3.1bn of EU Goods
The subsidies battle with the WTO and Airbus continues. The USTR announced that it’s considering adding additional tariffs on goods entering the US from the EU. Annex I shows the already imposed duties. Annex II shows the items that were under consideration but were not implemented. Annex III is the portion that is currently under review as the USTR accepts comments on those items between June 26 and July 26.
Comments for Exclusion Extensions
Starting on July 1, new portals open for importers to submit comments on why their items' exclusion should be granted an extension for another year. The exclusions for Section 301 List 4 items are set to expire on September 1. The USTR is accepting comments on them in the portal until July 30, and each exclusion will be reviewed on a case-by-case basis. Section 301 List 2 will also have a portal for the trade community to submit comments on exclusions that are expiring in September and October.
US Suspends Hong Kong License Exemptions
On Monday, the US suspended certain license exceptions and defense goods for export to Hong Kong. Secretary of State Mike Pompeo said the US would no longer distinguish between the export of controlled items to Hong Kong and mainland China. Wilbur Ross stated that Commerce Department regulations giving Hong Kong preferential treatment over China, including the availability of export license exceptions, are suspended.
For a roundup of tariff-related news, visit Tariff Insider.
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.