Freight Market Update: June 22, 2021
Ocean and air freight rates and trends; customs and trade industry news plus Covid-19 impacts for the week of June 22, 2021.
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Ocean Freight Market Update
Asia → North America (Transpacific Eastbound)
- Rate increases continue as demand far outstrips available capacity. While carriers have deployed all of their fleets, including extra-loaders and smaller vessels, port congestion and disruptions continue to cause bottlenecks and headaches for all parties involved in the supply chain. Meanwhile, moving rates on nearly all TPEB lanes remain at premium levels. Despite carriers’ efforts to increase capacity and keep cargo and assets moving, severe port and intermodal congestion continue to increase backlogs, slow transit time, and limit routings the carriers are able to service.
- Rates July 1st GRI expected
- Space Critical
- Capacity/Equipment Critical / severe under capacity
- Recommendation Book at least 4-6 weeks in advance of CRD and book on premium services.
Asia → Europe (Far East Westbound)
- Space and equipment crunch continues. Market demand exceeds supply and rates skyrocket. There are more blank sailings coming up in June/July and no improvement in equipment status. Carriers have a sizable backlog and are not able to accommodate their booking intake. Even with Yantian scheduled to reopen June 24, congestion there has caused further disruption. Omissions and diversions to alternative ports further aggravate the situation.
- Rates Significant increase on June 15th and rates will go up further moving into July
- Space Extremely tight space situation
- Capacity/Equipment Severe equipment shortage across all Asia origins
- Recommendation Book at least 4-5 week prior CRD. Consider the limited premium options. Adopt flexibility on equipment substitution.
Europe → North America (TAWB)
- Void sailings and port omissions continue. The ongoing port congestion and the ensuing vessel delays force carriers to adjust their official schedules in an effort to put vessels back in place.
- Rates New PSS / GRI have been announced for July, backed by strong vessel utilization and high-volume forecasts.
- Space Critical, there is high demand on all services.
- Capacity/Equipment Equipment and space are guaranteed only with Premium rates. Expect equipment availability to worsen in the coming months as the ripple effect of the Yantian–service disruption unfolds.
- Recommendation Book 5 or more weeks prior to CRD. Request Premium service for cargo that needs higher reliability.
India → North America
- Surge of exports beginning to flow to ports. As the ISC region continues to recover from their most recent wave of Covid infection, the region's manufacturing sector is coming back to life. This increase in cargo for export has caused additional strain on the available ocean capacity.
- Rates expected to increase in 1H July
- Space Tight to USWC and Canada
- Capacity/Equipment Equipment shortages easing. South India still a challenge. Feeder vessel space is tight for routes utilizing transhipment ports.
- Recommendation Use premiums on urgent shipments and shipments with CRD approaching.
North America → Asia
- Vessel delays and void sailings continue to shrink capacity. The US West Coast still bears the brunt of this lost capacity. Reacting to congestion a number of ocean carriers have adjusted the frequency of their Oakland and Seattle port calls. Carriers prioritizing moving their empties back compounds the situation.
- Rates BAF levels will increase for July 1. GRI advisories are mostly limited to reefer shipments at this time.
- Space Tight from the US East and West Coast. A new service launching in the US Gulf will increase its capacity a good deal. The port of Yantian closure may impact feeder networks for Southeast Asia destinations.
- Capacity/Equipment Capacity tight from the US East and West Coast. Equipment and Chassis tight at most ports and all ramps.
- Recommendation Book 4+ weeks out.
North America → Europe
- US and Europe port congestion diminish available capacity. Ocean carriers implement numerous port omissions to make up vessel schedules, causing a new set of backlogs.
- Rates Steady, but with a July 1 BAF change, rate levels are seeing an uptick.
- Space Very tight from the US West Coast. The US East Coast is being managed more tightly by a few ocean carriers due to lost space from vessel delays.
- Capacity/Equipment Containers at US EC ports are available but certain rail ramps are tight. Chassis very tight at both ports and rail ramps.
- Recommendation Recommend 4+ weeks lead time on bookings from the US East Coast and 5 to 6+ weeks if possible for the US West Coast.
Air Freight Market Update
- Air exports out of Asia remain subdued as Covid-related restrictions impact factory output. While the expected quarter-end surge of cargo has been underwhelming, here is a quick rundown of how the situation differs across Asia:
- China exports have been slowly picking up steam heading towards quarter end, with congestion at Yantian Port resulting in incremental air freight shipments.
- The Taiwan market has cooled considerably from the torrid levels seen at the end of May as reduced factory output from Covid restrictions and more ocean capacity (ships bypassing Yantian) influence airfreight demand. Rates to the US have fallen by about $3-4 per kg this week versus last week but volumes are expected to rebound by mid July.
- SE Asia remains very strong mainly due to reduced capacity. Indonesia is the most acute with over a week to get a booking. Thailand remains congested as well. Vietnam has available capacity.
- As we edge towards the end of the month, we see demand slightly higher to the US West Coast. USEC and Central are slightly more balanced. Rates remain stable.
- Capacity will continue to improve the most for EU <> US in the coming weeks with airlines adding purely PAX capacity in exchange for their “preighter” aircraft.
- For other lanes, early booking is still strongly advised to secure space at best rate levels.
- Similar to last week, Airport hubs in the EU are operating as normal and not reporting backlogs for import/export.
- Export capacity remains well utilized due to continued lack of belly capacity. For large consignments it can take 2-3 days from booking to uplift into key European destinations, mainly from the West Coast. Capacity from WC gateways is the most constrained to Europe, while the Midwest and EC are very manageable. Capacity from the WC to Asia is filling up well, not driven by perishables as in recent weeks.
- Space to India, Nepal and Bangladesh remains very constrained as aid and relief efforts reach the COVID-struck region—currently space is booked out until late June.
- LAX and ORD ground handlers facing backlogs are using off-airport facilities to manage the flood of cargo. Ground handlers still report 2-5 days of backlog for breaking down arriving freight.
- Trucking remains scarce for airport transfers and local pickup and deliveries, especially on the USWC.
Updates from Flexport's Customs & Compliance Team
House sees new GSP and MTB renewal bills with no immediate passage in sight
On June 17, Rep. Earl Blumenauer (D-OR) introduced a bill to renew GSP and authorize a new MTB bill under stricter environmental and labor rules, providing a narrowly focused counterpart to the US Innovation and Competition Act’s numerous trade provisions. However, the bill faces an uncertain future, with no bipartisan support yet and Congress set to begin an extended summer recess.
Section 301 CIT Case facing long path to final decision
On a recent public webinar, attorney David Cohen said that either party in the current Section 301 litigation will likely appeal any CIT decision in determining whether the US government legally applied tariffs for products on List 3 and 4A. In Mr. Cohen’s estimation, an appeal would extend the case’s resolution by two to three years, extending the timeframe for when plaintiffs could receive refunds for products subject to List 3 and 4A tariffs.
Factory Output News
Taiwan Exports up in May, the 15th straight month in a row. Exports have surged 25-40% year over year depending on the month. [Source]
UK to start negotiations to join Asia-Pacific free trade pact. Source
South Korea Exports are set to climb by double digits again in June as the global economy shakes off the effects of the pandemic [Source]
Vietnam Social distancing measures extended in Ho Chi Minh for another 15 days from June 15 onwards [Source]
Indonesia In May, export growth accelerated to an 11-year high, boosted by strong commodity prices and a low base effect, while imports increased as domestic demand increased. [Source]
Thailand The COVID-19 outbreak has affected more than 130 factories in Thailand, causing fear that the export sector could be severely impacted. [Source]
Bangladesh The country's single largest rooftop solar plant was inaugurated on 20th June in Anwara upazila. The country has been promoting renewable energy and hope to generate 40% of the electricity from renewable sources by 2041 [Source]
Pakistan Flights into UAE are suspended at least till July 6th. [Source]
Freight Market News
Yantian Port Says It Will Fully Reopen June 24 The port says it has effective controls of Covid-19 and will resume full operations on June 24, according to Seatrade Maritime News. Severe activity restrictions in Yantian have kept the port running at approximately 30% below capacity, according to the New York Times, with ships waiting more than two weeks to dock.
New Bill Proposes Carrier Controls In the wake of carriers refusing US exports, Congress is proposing amendments to the Shipping Act. American Shipper reports that the draft proposal includes a provision to prohibit the refusal of exports and another to promote reciprocal trade.
Suez Settlement May Occur Soon Negotiations between Ever Given insurers and the Suez Canal Authority are close enough to settlement, according to The Loadstar, that the parties requested an Egyptian court postpone the next hearing in favor of finalizing an agreement.
Economic highlights from Flexport Chief Economist Dr. Phil Levy
US business Inventories run low. The April 2021 ratio of inventories to sales was 1.25, down slightly from 1.26 in March and down dramatically from a spike of 1.73 in April 2020. The latest number was the lowest ratio since February 2012, and virtually ties the minimum since 1992 (1.24 in March 2011). The average value for the last 10 years was 1.36.
US retail sales down 1.3% in May after rising 0.9% in April. If we smooth by comparing the three months March-May with the preceding three months December-February, overall retail sales were up 11.9%. With this same three month comparison, among the leading categories were clothing (up 21.3%) and electronics and appliance (up 18.5%). Nonstore retailers seem to have cooled off a bit, up a below-average 8.0%.
Industrial production up 0.8% in May, with manufacturing up 0.9%, led by autos. Total industrial production was 1.4% below its February 2020 level. Capacity utilization was at 75.2%, or 4.4 percentage points below its long-run average.
US producer prices climb 6.6% over the 12 months to May, the biggest final-demand yearly increase since those data were first calculated in 2010.
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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.