Freight Market Update: March 9, 2021

[Webinar] Ocean Market Chaos Continues. What’s Next?

In the face of continued ocean market uncertainty, how best to plan your supply chain and buy freight? Pursue RFP season, or fall back on the spot market? Anticipate congestion, or figure it's a blip. Bring your questions on Wednesday, March 10 at 8:30am PT, or listen on-demand. Register now.

Ocean Freight Market Update

Asia → North America (Transpacific Eastbound)

• Rates: Lowered.
• GRI Mar 1: None.
• Capacity: Recommend advance booking notice at least 21 days prior to CRD.
• Notes: Space and equipment is opening up at FAK rate levels, with the most openings from Greater China (i.e., China Base Ports) to and via PSW (i.e., terminating in LA, or via LA to IPI locations). Loading on these lanes is occurring at FAK levels—please reach out to Flexport for help with market opportunities that have emerged!

Asia → Europe (Far East Westbound)

• Rates: Extended
• GRI Mar 1: Mostly extended until mid-March and some slight reductions
• Capacity: Recommend advance booking notice at least 21 days prior to CRD.
• Notes: Rates remain at high but stable levels which are expected to persist into March. Post CNY the volume has now recovered from week 10 and 11 onwards. Equipment shortage remains a challenge in the coming weeks. We have possibilities to take on more FAK cargo at FAK-rate levels. Some carriers are also accepting limited UK cargo again.

Europe → North America (Transatlantic Westbound)

• Rates: Increasing
• GRI March 1: Implemented
• GRI March 15 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. Expect further rate increases in April.
• 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 congestion: Increased vessel wait time in Savannah with several ships anchored outside the port. New York and LA/LB remain highly congested.
• Capacity development: upcoming blank sailings on the AL1, AL5 and AL6 service between week 9 and week 14. Expect void sailings to continue through April as carriers try to recover schedule reliability.

India → North America

Rates: Increasing GRI March 1: Implemented GRI March 15: Pending Capacity: Space is extremely full and rolling to USWC. Space is tight to USEC. Transhipment at SIN/CMB has 1-3 week delays. Equipment: Shortages reported in Mundra and Delhi regions. Equipment shortages continue to be an issue—please make bookings in advance so 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.

North America → Asia

Rates: Increasing GRI March 15—A few carriers announced increases for Asia and a substantial GRI to Australia/New Zealand. GRI April 1—Multiple carriers have announced another 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 try to make up time. We urge booking sooner to help ensure coverage for bookings.
• 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

Asia

• North and South China markets continue to be weaker than expected due to an influx of capacity and production volumes still not at post-CNY expectations. Market is showing signs of life and the picture should be quite different next week as we ramp up towards the end of Q1
• North Asia (Korea/Japan) and Southeast Asia markets are very busy and yields continue to climb as demand exceeds available capacity. The yield difference between these markets and China is approaching $4-5 per kg.
• Flexport just inaugurated 2x weekly dedicated freighter services from TPE to LAX and 6x weekly dedicated freighter services from ICN to LAX. Please contact your AE for all of the details.

Europe

• Trans-Atlantic market continues to be very strong in both directions as demand outstrips capacity. Cargo is taking between 5-7 days minimum for uplift so please plan ahead and be patient with transit times.

Americas

• US Export market is strong to both Europe and Asia. The backlogs to Europe are especially acute and transit times are much longer than normal. With the continued drought of belly capacity, expect these conditions to continue into the foreseeable future.

Factory Output News

Taiwan Semiconductor manufacturer TSMC seeks 9,000 new employees in Taiwan as the company has received global attention amid a shortage of semiconductors for the automotive industry [source]

South Korea Posco International aims to increase the production of fuel cell separators for electric vehicles to 10,000 tons by 2027 which are used to power cars, drones, robots, and UAM (Unmanned Aerial Systems) [source]

Philippines New Variant of Covid 19 Strain drives spike in Philippines with 3.2k New cases on Sunday 7th March [source]

Indonesia Swiss voters approved a free trade deal that will remove tariff from almost all of Switzerland's biggest exports to Indonesia, while the Swiss will abolish duties on Indonesian industrial products.[source]

India German auto parts manufacturer, Webasto, invests $34 million USD to set up sunroof factory in India [source]

Bangladesh Home textile sector posted a 39% increase to $730 million in the past eight months to February. However, leather declined 4.2% to $606 million. Non-leather footwear exports stagnated at $219 million versus last year’s $219.47 million [source]

Updates from Flexport's Customs & Compliance Team

CIT Questions Validity of First Sale for Non-Market Economies

In a March 1st decision by Senior Judge Thomas Aquilino of the Court of International Trade (CIT), first sale valuation methodology may not be a valid valuation methodology for products originating from non-market economies, such as China or Thailand. A non-market economy is generally identified by a government that meaningfully intervenes in setting cost or pricing structures in its economy. Senior Judge Aquilino’s decision was based on many factors, including China’s non-market economy status for antidumping duty considerations and conflicting testimony from employees of a Chinese manufacturer regarding government subsidies. It is unclear whether this decision will have larger implications on the broader use of first sale methodology.

US Temporarily Halts Retaliatory EU Tariffs

On March 4th, the U.S. and UK issued a joint statement on suspending tariffs related to the ongoing international litigation surrounding subsidies on large civilian aircrafts. Both countries are “undertaking a four-month tariff suspension to ease the burden on industry and take a bold, joint step towards resolving the longest running disputes at the World Trade Organization.”

USTR Extends 301 Exclusions for COVID-19 Treatment Products

In a March 5th notice published by the U.S. Trade Representative (USTR), it was announced that Section 301 exclusions for Chinese originating goods used to treat COVID-19 would be extended to September 30, 2021. The exclusions were originally set to expire March 31, 2021.

Economic highlights from Flexport Chief Economist Dr. Phil Levy

• Oil prices soar, with Brent Crude prices breaking above $70/barrel, following a missile attack on a Saudi Arabian oil facility on Sunday. This is the latest move in a near-doubling in just over four months. The Brent price closed at $37.46 on October 30, 2020. Increasing prices for oil and other commodities are one sign of a global economic recovery.
• Interest rates move up. The benchmark 10-year US Treasury bond yield closed the week at 1.58%, up from 1.42% at the beginning of the week and a recent low of 0.51% in August. Inflation-protected bonds show implicit 10-year inflation expectations of 2.22%, which means that “real” interest rates remain negative (expected inflation exceeds the nominal interest rate).
  • To the extent the nominal interest rate is used as a hurdle rate for projects or as a way to deflate future earnings streams for companies, rising rates can cut investments or lower valuations.
• US trades more in January. Imports were up 1.2%, while exports were up 1.0% over December. The increases were in goods trade, while services exports and imports declined.
• Brexit hits EU trade numbers with German exports to the UK down 30% year-on-year and Italian exports down 38%. Italian imports from the UK fell by 70%. French trade with the UK was also down from recent months.

Freight Market News

Some Carriers Skip US West Coast As congestion in US West Coast ports of Los Angeles and Long Beach continues, some carriers have decided to forego stops in the region and loop back to Asia after hitting Northern Europe. The Loadstar reports anchor times of up to two weeks while waiting for berths drives the decision.

Cargo Ship Orders Are on The Rise Carriers are ordering mega-vessels of up to 23,000 TEU for Asia-Europe routes and up to 15,000 TEU to supplement extraordinary ocean market demand for Asia imports to the US. The Wall Street Journal notes the orders may be a sign of an impending return to pre-pandemic factory production levels.

Pilots Object to Hong Kong Quarantine The Air Line Pilots Association has requested one major carrier stop laying over in Hong Kong, due to extreme conditions that, in some instances, include group stays in quarantine camps for up to two weeks or longer. American Shipper reports another remedy could be to staff planes with double crews.

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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.