Freight Market Update: March 23, 2021
Ocean and air freight rates and trends; customs and trade industry news plus Covid-19 impacts for the week of March, 23 2021.
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Ocean Freight Market Update
Asia → North America (Transpacific Eastbound)
- Rates: No change.
- GRI Mar 15: None.
- GRI Apr 1: TBD.
- Capacity: Recommended advance booking notice at least 21 days prior to CRD.
- Notes: Market has not changed significantly relative to last week, with rate levels holding and new capacity not being injected into the market yet to resolve space issues where space and equipment are tight. Southeast Asia and Taiwan remain the most difficult regions from a space / equipment standpoint. Space and equipment from Greater China to/via the Pacific Southwest to IPIs remains open at FAK rate levels.
Asia → Europe (Far East Westbound)
- Rates: Extended until end of March
- GRI Apr 1: Some carriers have indicated a rate increase
- Capacity: Recommend advance booking notice at least 21 days prior to CRD.
- Notes: FAK rates have decreased somewhat in March following the post CNY period but remain consistently high. Market outlook for Q2 is positive in terms of demand, with carriers having a very strong booking uptake for April. Equipment shortage remains a challenge in the coming weeks. We have possibilities to take on more FAK cargo at FAK rates. Some carriers are also accepting limited UK cargo again.
Europe → North America (Transatlantic Westbound)
- Rates: Increasing
- GRI March 15: Implemented
- GRI April 1 Likely Implemented
- Capacity: Recommend advanced booking notice at least 5 weeks prior to CRD.
- Notes: We recommend booking urgent cargo on Premium. The market is expected to remain strong through the end of Q2 due to high demand and capacity constraints.
- Supply remains extremely tight across Europe. There are shortages of Reefer containers and 40’/HC dry, in particular in Germany, Italy, Spain and Portugal. Ongoing severe equipment deficit in Turkey.
- Port updates: No agreement reached with the trade union of the Port of Montreal Longshoremen. The port remains open while negotiations continue with union members.
- Capacity development: In W15 capacity will drop by 40% to USEC and 52% to USWC vs previous week. Expect void sailings to continue through April as carriers try to recover schedule reliability.
India → North America
- Rates: Increased
- GRI March 15: Implemented
- GRI April 1: Pending
- Capacity: Space is extremely full and rolling to USWC and USEC. Transhipment delays continue to persist due to congestion and high volumes on TPEB trade. Suggested booking 15-20 days in advance.
- Equipment: Inventory shortages at Mundra, New Delhi, and Bangalore in particular.
- Notes: We recommend booking urgent cargo on Premium. Delays should be expected for USEC bound vessels due to ship running aground in the Suez Canal on 3/23.
North America → Asia
- Rates: Increasing
- GRI April 1: Multiple carriers intend to implement a GRI for the start of next month.
- Capacity: Recommend advanced booking notice 10-14 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.
- Vessel congestion remains severe at both US coasts continuously moving vessel cut-off dates and earliest return dates in the network.
North America → Europe
- Rates: Steady
- Port congestion along the US East Coast and in North Europe impacts vessel-schedule integrity for all services, causing capacity to be lost week to week as ships make up time. We urge booking sooner to help ensure coverage.
- Capacity: Recommend advanced booking notice 10–14 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.
Air Freight Market Update
- The market from Asia has really heated up in the past week as demand has surged and many origins are facing severe shortages of capacity. Mainland China and HKG rates to the US are between $6-$8 per kilo depending on West Coast or East Coast destinations with US East Coast capacity in severe shortage.
- Origins including TPE, BKK, SGN, HAN are seeing surging volumes due to quarter-end inertia, and we do expect these volumes to maintain at their current pace through the month of April.
- The FEWB trade lanes have been strong but stable from week to week with little movement in rates.
- European Export demand continues to show a lot of strength to the Americas and Asia. Rates remain at levels that are 2x from prior months. Carriers, unless express-level rates are paid to expedite cargo, still report booking backlogs of up to 10 days before cargo moves out on planes.
- For cargo exiting Europe, this capacity-demand imbalance is expected to accelerate before the Easter holidays.
- The US Export market remains strong to Europe, LATAM, and Asia. Demand outpaces capacity in all markets. Booking-backlogs of 7-10 days are reported to Europe, but some relief is seen for Asia-bound shipments. Due to the continued lack of belly capacity, we expect to see these conditions into April.
- Ground handling in several US cities, but primarily in Los Angeles, Chicago and New York continues to face backlogs caused by labor shortages and lack of truckers to recover cargo in time from terminals.
Factory Output News
South Korea Exports increase 12.5 percent on-year in the first 20 days of March with outbound shipments at $33.9 billion vs last year’s $30.1 billion. Memory chips, a key export item, rose 13.6 percent on-year during the cited period [Source]
Japan Recent fire at Renesas Electronics Corp’s Naka plant could result in a substantial cut in its supply of chips to its customers [Source]
Vietnam Steelmaker Giant Hoa Phat plans to manufacture 500,000 TEUs of containers per year starting from Q2 2022 to mitigate global container shortage. [Source]
Thailand is in talks with Sinovac for an additional purchase of 5 million COVID-19 doses after receiving 800,000 shots on Saturday. [Source]
Malaysia Penang Chief Minister appeals to enforce Safe@Work initiative on factories and manufacturing sectors to reduce the high COVID-19 cases. [Source]
Philippines Churches close, dining in restaurants and leisure travel out of the capital is banned as the country battles a resurgence of infections. New cases topped 7,000 for three consecutive days, the highest since the start of the pandemic. [Source]
Pakistan Medical Association urges government to consider country-wide lockdown to bring case down while the Federal Minister for Planning, Development, and Special Initiatives push back. [Source]
Australia Sydney hit with the worst flood in 60 years as thousands are forced to evacuate [Source]
Updates from Flexport's Customs & Compliance Team
EU Launches Import Control System 2
On March 15th the EU launched the first phase of its Import Control System 2 (ICS2). ICS2 is a new customs pre-arrival security and safety program, “underpinned by a large-scale advance cargo information system”. As part of this program, Economic Operators (EOs) must declare safety and security data to ICS2 through Entry Summary Declaration (ENS) prior to any imported goods’ arrival.
CBP to Add Forced Labor to Priority Trade Issues
On March 16th, the Commercial Customs Operations Advisory Committee (COAC) Forced Labor Working Group released a set of recommendations to Customs that included an announcement saying that Customs was “intent to proceed with establishing Forced Labor as a Priority Trade Issue [(PTI)].” PTIs “represent high-risk areas that cause significant revenue loss, harm the U.S. economy, or threaten the health and safety of the American people.” As such, they receive dedicated resources for special enforcement operations and regulatory initiatives.
Economic highlights from Flexport Chief Economist Dr. Phil Levy
- Retail sales retreat in February. After a strong increase in January (7.6%), the advance numbers for February showed a 3.0% monthly decline. The picture is strong, though, when smoothing monthly swings: Retail sales from December 2020 through February 2021 were up 6.0% from the same months a year before.
- Comparing February 2021 to February 2020, non store retail was up 25.9% while department store sales were down 14.5% and clothing store sales down 11.3%.
- US unemployment claims rise. The weekly filings rose to 770K, the highest level in four weeks.
- US factory production drops. Federal Reserve indices of manufacturing output and capacity utilization both dropped in February by about 3%, dropping down to levels last seen in September 2020. Some analysts attributed the drop to bad weather and supply chain difficulties.
- Japanese exports slide, down 4.5% from a year earlier, the first drop in 3 months and substantially more than expected.
- Japan’s central bank concluded a monetary policy review by noting the limited effectiveness of aggressive monetary policy—negative interest rates and large equity purchases. Japan adopted such measures well before the US and Europe to counter deflation and slow growth.
Freight Market News
Outsize Demand Drives Ship Builds A rush of ship-building is underway, despite the possibility of near-future decarbonization rules that won’t necessarily grandfather in the new builds. American Shipper reports extraordinary demand points to high enough returns to justify the larger ships. In most cases, the new orders will expand fleets, not replace older vessels.
Stimulus Could Spread Congestion The congestion bottlenecking Southern California ports is being diverted into Northern California, as the Wall Street Journal reports US West Coast traffic jams could continue through the summer. An additional surge may be on the horizon, as Americans receive economic stimulus.
First Ship Tunnel Gets Green Light The Norwegian Coastal Administration confirms it will start work on the Stad Ship Tunnel, the first ship tunnel in the world. The Maritime Executive reports the small tunnel will help ships avoid difficult navigation around an Arctic peninsula.
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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.