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Market Update

Freight Market Update: May 31, 2022

Ocean and air freight rates and trends; customs and trade industry news plus Covid-19 impacts for the week of May 31, 2022.

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North America Freight Market Update Live | Thurs, June 2 @ 8:30 am PT

European Freight Market Update Live | Tue, June 14 @ 16:00 CEST / 15:00 BST

Ocean Freight Market Update

Asia → North America (TPEB)

  • Capacity remains up for grabs as signs point to worsening congestion. Uncertainty remains as to what demand will look like when lockdown measures in China come to an end. Some warn that a sharp spike in demand will put pressure on destination ports and inland hubs once again. International Longshore and Warehouse Union (ILWU) and Pacific Maritime Association (PMA) labor negotiations remain underway. For cargo ready now, importers might consider taking advantage of currently available space and softer floating market rates.
  • Rates: Levels remain elevated relative to the pre-Covid market with softening in many major pockets, especially into U.S. west coast (USWC) ports.
  • Space: Mostly open, except in pockets.
  • Capacity/Equipment: Open, except in pockets.
  • Recommendation: Book at least 2 weeks prior to cargo ready date (CRD). Consider premium options where needed. Be flexible in regard to equipment and routings. Check closely with suppliers to understand any Covid-related impacts or changes to production outputs and forecasts.

Asia → Europe (FEWB)

  • Demand is picking up, but congestion is still having a widespread impact on capacity deployed on this route. Shanghai is slowly opening following a lockdown of almost 2 months. The third quarter is expected to be strong with a summer peak. However, there are many uncertainties on a macro level such as the Ukraine conflict, high inflation across Europe, and low consumer confidence.
  • Rates: Rates are expected to increase in June due to tighter space.
  • Capacity/Equipment: Overall space is starting to fill up again. Congestion in European ports is causing sailings to return to Asia late, resulting in additional delays and blank sailings.
  • Recommendation: Allow flexibility when planning your shipments due to anticipated congestion and delays.

Europe → North America (TAWB)

  • Congestion on the North America side is still ongoing. Savanna, Charleston, and Seattle are the ports that have shown the highest level of improvement.
  • Rates: No further increases are expected for June, but overall rates remain at record levels.
  • Space: Still very tight on both coasts but with some sign of improvement on certain loops for both the U.S. east coast (USEC) and U.S. west coast (USWC).
  • Capacity/Equipment: Capacity remains tight for both North Europe and Mediterranean services. Better equipment availability at port. Shortages remain at inland depots.
  • Recommendation: Book 4 or more weeks prior to CRD. Request premium service for higher reliability and no-roll.

Indian Subcontinent → North America

  • Softening demand for June has led to carriers passing on rate deductions on many key lanes.
  • Rates: Decreased for 1H June.
  • Space: Available at FAK rate levels.
  • Capacity/Equipment: Remaining stable with deficits of equipment in Inland Container Depots (ICDs).
  • Recommendation: Take advantage of declining rates. In the past carriers have implemented blank sailings to avoid underutilization. This could lead to increased rates on the horizon.

North America → Asia

  • Vessel arrivals and available capacity remain fluid for all USWC ports. More blank sailings due to the vessel backlog in Shanghai can be expected. The USEC continues to see challenges with vessel congestion and some vessel strings omitting Charleston and Savannah entirely. Erratic vessel schedules continue to cause significant challenges with posted earliest return dates and vessel cut-offs at the port.
  • Rates: Limited general rate increase (GRI) activity was announced for June.
  • Capacity/Equipment: Deficits on containers and chassis continue to plague Inland Port Intermodal (IPI) origins. Availability for standard equipment at ports has not been an issue for most ports but a large number of carriers have advised of continuing shortages on 40s at the port of Oakland.
  • Recommendation: Please place bookings 4 weeks prior to vessel Estimated Time of Departure (ETD).

North America → Europe

  • Significant congestion and vessel delays in Europe remain, in addition to the ongoing schedule issues for New York, Charleston, and Savannah. The port of Houston continues to experience significant capacity constraints due to schedule delays and port congestion with one service being reduced from weekly to biweekly. USWC service to Europe is extremely tight due to void sailings and skipped ports caused by systematic delays. The suspension of Pacific Northwest coverage for North Europe may be lifted in July if the operational situation permits. USWC coverage for Mediterranean ports will see capacity reduced with one of the ocean carriers phasing out its service. All carriers have issued a booking stop for shipments to Ukraine, Russia, and Belarus.
  • Rates: No GRI announced for June.
  • Capacity/Equipment: Deficits are still plaguing IPI origins. Availability for standard equipment at ports has not been an issue, but special equipment is hard to come by.
  • Recommendation: Please place bookings 3 to 4 weeks in advance for East Coast/Gulf sailings and 6 weeks for Pacific Coast sailings.

North America Vessel Dwell Times

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Air Freight Market Update

Asia

  • N. China: With Covid cases dropping to below 100 per day, businesses should begin to resume work starting on Wednesday, June 1. The government will also revise the guidelines for epidemic prevention and control in regards to returning to work and production. With the Dragon Boat Festival coming up this week, we expect demand to gradually pick up in the coming weeks. Flight and trucking capacity are also continuing to recover, with rate increases on both the TPEB and FEWB lanes.
  • S. China: The market is gradually continuing to improve. TPEB demand is stable and rates are similar to last week, while FEWB demand is strong, particularly to the UK.
  • Taiwan: The market is quite stable however factories continue to face shortages of raw materials. Fuel will increase starting June 1st, and rates on the TPEB and FEWB lanes have dropped slightly.
  • SE Asia: Ex-Malaysia the market continues to be soft in large part due to a lack of raw materials, however, once China recovers from lockdown the market is expected to pick up. The air market in Thailand is also quite weak with airlines eager for cargo. Demand ex-Vietnam is beginning to pick up. With standard rates maintaining at similar levels to last week and space tight at transit hubs, we’re seeing increases in express service rates. Demand is expected to be strong in June and may result in higher rates.

Europe

  • Overall demand is starting to reduce with the start of the summer slack season while fast/high-end fashion is still showing higher demand due to the season change.
  • Capacity is at an all-time high and with the soft demand rate levels are starting to reduce especially on the transatlantic (TA) trade lane.
  • Jet fuel pricing is also starting to decrease, however, slight fuel uncertainty persists.
  • Freighter capacity is improving with better rates and lead times, booking to uplift window is approx 6-10 days.
  • Build pallets below 160CM increase the possibilities of better uplift and rates based on passenger capacity.
  • Deferred routings via secondary hubs are still providing cheaper rates overall.
  • For all trade lanes, continue to place bookings early to secure the best uplift options/routings.

Americas

  • Demand remains high, especially into Europe. Capacity is manageable and has already surpassed 2019 pre-covid levels.
  • Origin dwell times of 2-3 days have been reported in some cases.
  • Capacity is opening into Shanghai Pudong (PVG) as restrictions are lifted.
  • Los Angeles, Chicago, and New York (LAX/ORD/JFK) ground-handlers are dealing with high volume considering the heavy export throughput.
  • Rates have slightly softened compared to previous weeks, especially Europe. The main reason is the additional belly capacity added into the Transatlantic lane.

Trucking & Intermodal

Americas

  • US Import/Export Trucking
    • Market Trends
      • Trucking capacity in major North American markets is starting to open up as import volumes decrease across the country. The lockdowns we have seen over the past weeks across major China cities like Shanghai, Guangzhou, and Beijing, will reduce even more the inbound volume US ports receive into June.
      • Inland markets' trucking capacity also remains high, driven by the lack of offered IPI bookings.
      • The cartage market is beginning to soften due to the air market, and carriers are seeking volume. This softening is providing Flexport trucking an opportunity to evaluate the carriers in each market and start strategically allocating volume to carriers. The goal is to have specific partners assigned to different aspects of cartage in preparation for peak. Rather than having one carrier handle all cartage in a market, we will specify partners for airline transfers (intact vs loose) and for local pickups and deliveries.
  • US Domestic Trucking
    • Contract business is gaining more interest from carriers than spot loads as fuel surcharge agreements are almost exclusively associated with contract freight.
    • Diesel prices remain at record highs, peaking at $5.62/gallon in May. Fuel continues to be a much more taxing operating expense for fleets both on loaded and empty miles.
    • Tender volumes climbed back at the tail end of May largely due to the Memorial Day push, however, overall volumes are still low—down 20% YoY.
    • Tender rejection rates bounced back marginally the last week of May after diving 8%.
    • Capacity has tightened in the South & Southeast markets due to the produce season.
    • We are still seeing lower spot rates in the market (down 20%+ YoY), but they crept up in the final days of May.

Customs and Compliance News

Tariff exclusions for COVID-19-related products extended The US Trade Representative (USTR) announced an extension for exclusions related to COVID-19 related products originally set to expire on May 31, 2022. For the 81 exclusion descriptions, the new expiration date is November 30, 2022.

New Activity Related to UK-US Free Trade The United Kingdom and the state of Indiana have signed a trade and economic development Memorandum of Understanding (MoU). The MoU’s intent is to spur closer business and financial ties between the UK and Indiana by lowering trade and investment barriers. On the federal level, the US Senate unanimously approved a nonbinding resolution to pursue a free trade agreement with the UK. Senator Mike Lee (R-UT) introduced the resolution to pressure the USTR to resume negotiations with the UK on a final, comprehensive free trade agreement.

Factory Output news

  • Mainland China: The throughput of containers at the Shanghai Port has returned to more than 95% of the normal level and China’s logistics chain resumes normal operations. Source
  • Indonesia: High consumption of poultry in Indonesia proves a challenge for Indonesia replacing Malaysia as an exporter of chicken. Source
  • India: The Gujarat Government has given the green light to Tata Motors to take over Ford India’s passenger car plant in Sanand after Ford Motor ceased operation in India. Source
  • Sri Lanka: South Indian Ports see an increase in transshipment as some ships divert from the Port of Colombo. Source
  • Bangladesh: Spica J carrying over 500 TEUs begins direct container shipping to the Netherlands, slashing freight time and cost. Source
  • Pakistan: Mango farmers continue to face struggles as a heatwave, global warming, and coronavirus all negatively impact export numbers. Source

Freight Market News

Contract Rates Rise Above Spot The Loadstar has reported that long-term container line contract rate agreements have reached new highs, in some instances much higher than the spot market rates. In this current market, shippers are being “bled dry,” while carriers reported record earnings. As Shanghai lockdowns are lifted, pending supply chain disruption will only continue to boost earnings.

Shanghai’s Lockdown Impact on Port of Oakland According to SupplyChainDive, the lockdowns in Shanghai have delayed US-bound shipments, which has led to disruption of ocean carrier scheduling. The Port of Oakland reports that cargo in April has dropped by 7% as compared to the previous period in 2021. As volume has slowed, the number of vessels going into the port has decreased significantly.

Flexport Research Updates

Weekly Economic Report: Smooth Consumers The pandemic era has seen wild swings in US personal savings, with the rate hitting its lowest in over a decade in April. The accumulated savings during the pandemic have allowed consumption to remain strong, even as income growth has faltered. Most recently, there has been a split between stronger durables and weaker non-durables consumption.

Air Timeliness Indicator The Air Timeliness Indicator measures the amount of time taken to move airfreight along two major trade lanes from the point of consolidation to arrival at final destination. The latest indicator saw the Transpacific Eastbound lane (TPEB) decrease to 11.1 days for the four weeks leading to May 29. For the Far-East Westbound lane (FEWB), there was also a significant decrease to 10.2 days. Air times may reflect seasonal shifts working their way out of the system as importers switch to summer goods.

Ocean Timeliness Indicator The Ocean Timeliness Indicator similarly measures transit time for ocean freight along the same two trade lanes. In the past week, the TPEB fell to 100 days, reaching the lowest since November 7 2021 following a decline from seasonal highs. The FEWB fell by 1 day to 104 days, likely as the result of improved cargo-ready to origin port departure times.

Logistics Pressure Matrix Flexport’s Logistics Pressure Matrix (LPM) gathers 10 data points in an attempt to provide a picture of the challenges facing logistics networks from the demand side and a view of ongoing activity on US-inbound routes. In the latest update, the various measures appear to be taking contradictory paths. Retail inventories and shipping rates increased, indicating increased pressure. Yet, the inflation-adjusted value of imports fell and the timeliness of ocean and air freight have improved. Upstream supply chain disruptions may be playing their part.

Freight Market Update is a complimentary service from Flexport, the modern freight forwarder. If you're not already a subscriber, we invite you to subscribe here.

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.

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