Freight Market Update: June 8, 2021
Ocean and air freight rates and trends; customs and trade industry news plus Covid-19 impacts for the week of June 8, 2021.
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Ocean Freight Market Update
Asia → North America (Transpacific Eastbound)
- Schedule reliability remains a challenge as carriers continue to grapple with delayed berthing appointments at extremely congested ports like Oakland. At origin, COVID outbreaks are causing disruptions to labor forces and are prompting some strings to omit calling Yantian, likely causing a backlog of cargo for the next few weeks. The limited amount of available space, high number of blank sailings, disruptions due to congestion and ad-hoc port calls/omissions, and strong demand together mean big challenges on TPEB.
- Rates June 1 GRI implemented, June 15 GRI expected
- Space Critical
- Capacity/Equipment Critical / severe under capacity
- Recommendation Book at least 4-6 weeks in advance of CRD.
Asia → Europe (Far East Westbound)
- Space and equipment crunch continues. Market demand is exceeding supply. 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. Yantian port restrictions and congestion are causing further disruption as well. First alliances divert from Yantian to alternative ports like Nansha and Shekou
- Rates Significant increase on June 1st and further increase on June 15th and July.
- Space Extremely tight space situation
- Capacity/Equipment Severe equipment shortage across all Asia origins
- Recommendation Advance booking of at least 4-5 weeks prior CRD. Consider the limited premium options. Adopt flexibility on equipment substitution.
Europe → North America (TAWB)
- New rate hike took effect in June as demand continues to outpace available capacity.
- Rates Expect freight rates to climb further in July.
- Space Critical, there is high demand on all services.
- Capacity/Equipment Capacity is impacted by blank sailings and port omissions made by carriers to get their schedules back in order. Schedule reliability is improving but still below 35%. Slight improvement in equipment availability in North Europe ports, but shortages at inland depots will continue in the mid-term.
- Recommendation Book 5 or more weeks prior to Cargo Ready Date. Request Premium service for cargo that needs higher reliability.
India → North America
- Covid restrictions are easing in the region and port congestion is causing downstream delays. Since the most recent covid restrictions were introduced to the region, manufacturing and exports have slowed, leading to short-term relief in space now ending. We expect space to be a challenge through the summer. Congestion at major base and transhipment ports due to schedule reliability are causing carriers to utilize vessel space to clear backlogs, further increasing the difficulty of finding space for new bookings. Backlogs are most concerning in Southern India and Colombo, Sri Lanka.
- Rates 1st half of June GRI Implemented - 2nd half of June GRI is expected
- Space Tight to USWC and Canada
- Capacity/Equipment Equipment shortages easing. South India still a challenge
- Recommendation Use premiums on urgent shipments and shipments with quickly approaching CRDs
North America → Asia
- Vessel Delays and Void sailings continue to shrink capacity. The US West Coast is still most affected by this lost capacity. Carriers prioritizing moving their empties back, compounds the situation.
- Rates Anticipating quarterly BAF levels will increase for July 1. GRI advisories are mostly limited to reefer shipments at this time.
- Space Tight from US East and West Coast. A new service launching in the US Gulf will increase its capacity a good deal.
- Capacity/Equipment Capacity tight from 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 should see 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. Equipment at US East Coast ports is available but rail ramps are very tight.
- Recommendation Recommend 4+ weeks lead time on bookings from the US East Coast and 5 to 6+ weeks where possible for the US West Coast.
Air Freight Market Update
- The market ex-Asia (both TPEB and FEWB) cooled a bit this week as demand and capacity inched closer to stabilization.
- DEMAND - On the demand front, Covid outbreaks in many origins including TPE, SGN, BKK, KUL and others prompted officials to impose regional lockdowns, impacting factory output and volumes flowing to airports.
- CAPACITY - Several Asian carriers increased capacity with their freighter fleets as crew restrictions were lifted, most notably by China Airlines. Cathay Pacific also announced a return to 90% of planned freighter flights, bringing much needed relief.
- These market conditions are expected to be short lived as Covid restrictions lift by mid-month and factory output resumes to normal in most locations. Major shippers accelerate shipments to meet targets before the end of Q2 is another temporary factor. As we head towards the end of June, we expect the airfreight market to be very tight on the TPEB and slightly less so on the FEWB.
- More ocean-to-air conversions and special projects are on the horizon as and should keep the airfreight market very strong throughout summer.
- European export demand shows continued strength to North and South America and Asia. Space to the U.S. West Coast remains constrained. No meaningful capacity into North America was added over the past week, though some carriers are signaling to add more capacity on the Transatlantic trade. Space to Asia remains very well utilized, especially to China and Japan and to the Indian Subcontinent (mainly aid and relief shipments).
- Major airport hubs, as well as secondary airports in Europe are reporting normal throughput for air imports and air exports.
- Export capacity remains well utilized due to continued lack of belly capacity, though there’s softening in certain European markets. It can take 2-3 days from booking to uplift into key European destinations, mainly from the West Coast. Capacity from West Coast gateways is the most constrained to Europe, while the Midwest and East Coast are very manageable. Capacity from the West Coast to Asia is filling up well, though not as quickly as in recent weeks.
- Space to India, Nepal and Bangladesh remains very constrained, due to aid and relief efforts into the COVID-struck region—currently space is booked out until mid-to-late June.
- With a high number of freighter flights from Asia and Europe, LAX and ORD ground handlers are facing backlogs and are using off-airport facilities to manage the flood of cargo. Ground handlers are reportedly 3-6 days behind in breaking down freight from arriving flights.
- Trucking remains scarce for airport recoveries and local deliveries, especially on the US West Coast.
Updates from Flexport's Customs & Compliance Team
China Competition Bill, with New Trade Provisions, on the Cusp of Senate Passage
On May 27, Senator Mike Crapo (R-ID) secured the inclusion of the Trade Act of 2021 as an amendment to the US Innovation and Competition Act, adding trade and supply chain resiliency elements to a bill originally intended to bolster US R&D research capabilities. However, the US Innovation and Competition Act faces a daunting path to passage in the House of Representatives so the current iteration may see vast changes in the future.
USTR Announces, and Subsequently Suspends, Section 301 Taxes related to DST
On June 2, USTR Katherine Tai announced the conclusion of her office’s investigation into Digital Service Taxes (DSTs) of six countries, determining that the DSTs warrant the imposition of Section 301 tariffs on some products originating from those countries. However, she suspended the imposition of the tariffs for up to 180 days, to give the relevant agencies time to negotiate a global taxation agreement.
Factory Output News
China Carriers are widening the number of load ports as alternatives to Yantian in southern China as port congestions persist [source]
Japan is closing its borders to all new foreign arrivals except foreign residents of Japan until further notice and expected to have received enough vaccines for the entire population by the end of September [Source]
Vietnam seeking to build up vaccine programme by buying vaccine production technology and setting up its own plant in the country [Source] [Philippines] A tropical storm hit the southern and central Philippines, displacing many villagers. Passengers and cargo handlers were stuck at the seaports. A small cargo ship was abandoned by its crew when water started entering. [Source]
Bangladesh May export grew at a record pace with a 112% increase YOY. Export income from ready made garments , which contribute to 84% of Bangladesh’s export, surged by 11.1% in the first 11th month of the 2020-2021 fiscal year. [Source]
Bangladesh will extend its Covid-19 lockdown by 10 days till 16th June. [Source]
Sri Lanka will extend its Covid-19 lockdown by 7 days till 14th June. [Source]
Pakistan will reduce some import tax in a drive to push for growth. The reduction will be focusing on raw materials to boost the manufacturing sectors. [Source]
Freight Market News
IMO Inaction Raises Eyebrows The International Maritime Organization is set to enact its first greenhouse gas rules since the Paris Agreement, but with no emissions cuts or enforcement mechanisms, environmental progress could be slow. The New York Times reports the inaction is partially due to dilutive efforts by Agreement signatory countries.
South China Congestion Thickens Delays in Yantian, the world’s fourth-busiest port, are spilling into other regional ports after a Covid outbreak temporarily closed a terminal there. The Loadstar reports more than 30 ships at anchor outside Yantian.
Economic highlights from Flexport Chief Economist Dr. Phil Levy
Eurozone Inflation Up in May The estimated Eurozone inflation rate for May was 2.0%, notable both because it was up from 1.6% in April and because it hit the European Central Bank’s target rate. The figure was heavily driven by surging energy prices.
Global Prices Rise For an even broader group of countries, one month earlier, the OECD measured inflation at 3.3% in April among its members, the highest rate since October 2008. Separately, a UN index of world food costs hit its highest level in almost a decade.
US Cost Measure Increases Unit labor costs rose substantially more than first estimated for Q1. Broad nonfarm costs rose 1.7% at an annual rate, while manufacturing costs rose 10.7%.
EU Retail Sales Drop EU retail sales dropped in April, following a March increase. Retail trade was down 3.1% in the Eurozone and EU, but 5.5% in Germany and 6.0% in France.
Chinese Trade Grows Both exports and imports were up substantially year-over-year in May, but fell short of expectations. The lofty numbers—imports up 51.1%, exports up 27.9%—reflect a low base in 2020 and fell short of predictions.
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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.