Market Update

Freight Market Update: May 22, 2019

Ocean and air freight rates and trends; trucking and customs news for the week of May 22, 2019.

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Ocean Freight Market Updates

Hari Raya Holiday Season May Cause May and June Delays

The Muslim holiday will likely cause shipping delays in Indonesia, Malaysia, Singapore, and other observing countries as those celebrating take time away from work. Your operations team will keep you informed of any delays to your shipments.

Weight Restrictions on Panama Canal Shipments

The Panama Canal restricts the draft (how deep the hull goes into the water) of vessels based on the amount of water available in Gatun Lake, which varies based on rainfall, amount of vessels and other factors. Ships must be lighter to meet the draft requirement, so they need to carry less cargo/ballast/fuel or offload cargo to the Panama Canal Railway.

The Panama Canal Authority has postponed the further reduction to allowable vessel draft for the Neopanamax locks and Panamax locks from May 28, 2019 to June 12, 2019 due to increased rainfall. The long drought has cut capacity through the canal by almost one-fifth and boosted rates for shipments headed to the U.S. East Coast.

Port of New York and New Jersey Prepared for More Cargo

As container ship sizes grow, the Port of New York and New Jersey says it’s prepared to handle the additional cargo. The port can currently handle up to nine ultra-large container ships at one time, significantly more than the Port of Savannah, which will be able to handle six of a similar size by 2024. According to Freightwaves, “the ability to handle more, larger ships makes New York-New Jersey the first port of call for up to 75% of vessels bound for the U.S. East Coast."

Impact of New IMO ECA Regulations

The International Maritime Organization (IMO) has mandated under new Emission Control Area regulations that by 2020, all merchant vessels must reduce their sulfur emissions from 3.5% to 0.5%.

Whether they install scrubbers, build new vessels, or use higher-quality fuel, carriers will need to make significant changes to comply with the new regulations, and those changes will come at a cost to shippers. Freight rates may climb between now and 2020 as a result.

For an in-depth look at the regulation and how to prepare, read our blog post: IMO 2020: What Shippers Need to Know Now


Air Freight Market Updates

Jet Airways Declared Bankrupt

A Dutch court has declared Jet Airways bankrupt, although it is unclear whether Indian law will recognize the decision. Other air carriers are snapping up the suspended airline’s trade routes. Air India is set to benefit the most from the decision, as the carrier was given first foreign flying rights.

*Air Market Sees Small Uptick *

March air cargo volumes were 0.1% higher than last year, marking the first month of growth after four months of no or negative volume change. But trade tensions are creating an uncertain landscape, and according to the International Air Transport Association (IATA),”it would be premature to suggest that the uptick represents a change in the trend growth rate without first seeing signs of confirmation in coming months.”


Trucking Market Updates

International Roadcheck Coming June 4-6, 2019

The Commercial Vehicle Safety Alliance’s (CVSA) International Roadcheck will take place June 4-6th, 2019. International Roadcheck is an annual three-day event in which CVSA inspectors examine as many trucks as possible, looking for anything that doesn’t meet their safety standards for motor carriers, vehicles or drivers.

International Roadcheck may lead to delays and/or increased costs, for a few reasons:

  • Some FTL carriers and drivers choose not to operate during the week of International Roadcheck, constraining overall capacity.
  • Non-compliant drivers and vehicles taken out of service will cause reduced capacity and delays.
  • All drivers must wait in lines (which are sometimes long) until they are inspected. The inspection itself takes about an hour.

FMCSA Asking for Public Comments on Lower Driving Age

The Federal Motor Carrier Safety Administration (FMCSA) is asking for public comment on training, qualification and safety concerns regarding a pilot program that would allow 18-20 year-olds to drive commercial motor vehicles in interstate commerce. The program would create more jobs in the industry and address the nationwide truck driver shortage. So far 75% of received comments are against the program.

JB Hunt Receives NVOCC License

JB Hunt received its NVOCC license from the Federal Maritime Commission (FMC), formally entering the business of freight forwarding. The industry is still speculating on what JB Hunt will do with the license, but they may “develop more fully-fledged transpacific freight forwarding services for its domestic customers.”


Customs and Trade Updates

U.S., Canada and Mexico Section 232 Tariffs and Trade Agreement Update

On Sunday, May 19th, President Trump made a presidential proclamation that the U.S. would remove the steel and aluminum tariffs on goods coming from Canada and Mexico. Once the Section 232 tariffs were lifted, Canada removed their tariffs in a joint statement with the U.S, as did Mexico in another joint statement. Canada and Mexico are dropping their dispute cases with the World Trade Organization (WTO) in light of the recent developments. Now that the tariffs have been lifted, the chance that the United States-Mexico-Canada Agreement (USMCA) will be ratified in Canada and Mexico has increased exponentially.

U.S. Officially Removes Turkey From GSP

In a presidential proclamation, the U.S. officially removed Turkey from the beneficiary countries under the Generalized System of Preferences (GSP), 60 days after the original notice was posted. In a second presidential proclamation, the president reduced the Section 232 tariffs that had been imposed on Turkey for steel and aluminum from 50% to 25%, beginning on May 21st.

U.S. Sanctions on Huawei Exports

President Trump implemented export restrictions on the Chinese telecom company Huawei and its 68 affiliates in an executive order last week. The order declared a national emergency citing the threat of foreign adversaries using U.S. Information and Communications Technology (ICT) for economic and industrial espionage.

For a roundup of tariff-related news and the latest on the new fourth tranche, read our Tariff Insider.

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