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Market Update

Freight Market Update: September 13, 2022

Ocean and air freight rates and trends; customs and trade industry news plus Covid-19 impacts for the week of September 13, 2022.

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Special Ocean Market Announcement:

The Ocean Market has entered a new phase.

The Transpacific Eastbound (TPEB) specifically is seeing a post-COVID plummet.

Multiple trades are experiencing rate declines from their pandemic highs, but the TPEB has been declining at an unprecedented rate since late July. Far from a traditional peak season on the trade, rates are plummeting to levels not seen since 2020.

The reason for these unexpectedly precipitous rate drops is actually a combination of traditional supply and demand factors.

Supply—though still far from predictable with congestion-related blank sailings steadily sapping 20-30% of capacity—has been pretty stable for the last two quarters in total TEU deployment and monthly improvements in transit reliability. Meanwhile Demand has been decreasing due to high U.S. inventory levels and U.S. consumer purchasing moving towards a pre-COVID spread of goods and services. See more details on these Supply and Demand factors on Flexport’s Freight Market Update from September 8. And check out Flexport Research for insights from the first government export report for August from South Korea that shows a decline in most major consumer exports.

What now?

So far, there’s no indication of where or when rates will settle. Golden Week in early October will provide a breather, likely before an October and November demand lull where, traditionally, TPEB sees some of the lowest rates of the year.

While rate declines are good for cost savings, there’s still a lot of challenges out there with congestion, chassis shortages, and more blanks on the horizon. Please reach out to your Flexport Account Management team to strategize on how best to navigate through these waters in Q4 and into 2023.

European Freight Market Update Live | Tues, September 20 @ 16:00 CEST / 15:00 BST

Flexport Capital: Helping Brands Navigate a Cash Crunch | Weds, September 21 @ 9:00 am PT / 12:00 pm ET

Ocean Freight Market Update

Asia → North America (TPEB)

  • Transpacific Eastbound (TPEB) demand and rates continue to drop with blank sailings on the horizon:
    • U.S.: The expected demand and TPEB volume from shippers to get ahead of Golden Week is in question this year as the Freight All Kinds (FAK) market continues to soften and mitigations are frequent. Blank sailings continue to spot the market for September and October as the carriers look to reduce the total number of anchored vessels at the ports, especially U.S. East Coast (USEC) and U.S. Gulf Coast (USGC).
    • Canada: The West Coast ports (Vancouver/Prince Rupert) are operating at near yard capacity creating vessel berthing delay issues for Vancouver (18 vessels total, up 3 from last week). The port and IPI congestion has been consistent week-to-week but is down overall from its peak over the summer.
  • Rates: Rates remain soft in many major pockets.
  • Space: Open, except in a few pockets.
  • Capacity/Equipment: Open, except in a few pockets.
  • Recommendation: Book at least__ 2 weeks__ prior to cargo ready date (CRD).

Asia → Europe (FEWB)

  • Without any peak season in Q3, demand has been slow with no recovery. There is also no pre-Golden Week cargo rush anticipated. Space is available but schedule reliability continues to be affected by a large amount of blank sailings, vessel sliding and port omissions. Port congestion in Europe, particularly Hamburg and Rotterdam, has reached critical levels causing further delays and late return of vessels to Asia.
  • Rates: Ongoing rate pressure on spot rates due to low demand.
  • Capacity/Equipment: Generally open space but impacted by blank sailings and vessel delays.
  • Recommendation: Allow flexibility when planning your shipments due to anticipated congestion and delays.

Europe → North America (TAWB)

  • Canada is facing rail yard congestion while on the US side the situation is unchanged with U.S. West Coast (USWC) easing up and USEC still struggling to bring delays and congestion down.
  • Rates: No revisions downwards have been announced by carriers at the moment. Levels remain high but stable, expectations are that this will remain through the end of Q4 2022.
  • Space: Still very tight on the USEC with some space open for direct routing to the USWC.
  • Capacity/Equipment: Equipment availability remains the biggest challenge for all EU origins, particularly in the Mediterranean region. Low empty stacks at inland depots, prioritize pick up from the Port of Loading.
  • Recommendation: Book 4 or more weeks prior to CRD. Request premium service for higher reliability and no-roll.

Indian Subcontinent → North America

  • Further rate decreases seen across most port pairs as capacity continues to outweigh demand.
  • Rates: changes occurring with more velocity across the market. USWC being the most affected where rates are coming closer to Transpacific Eastbound (TPEB) levels. USEC rates are declining, but at a slower pace.
  • Capacity/Space: Space is available across most lanes at standard (non-premium) rates. Decreases in port congestion globally is effectively increasing capacity as ships are experiencing less delays covering shorter periods of time.
  • Equipment: Smaller ports and inland container depots (ICD) will continue to have sporadic deficits based on import/export cargo mix.
  • Recommendation: Take advantage of declining rates.

North America → Asia

  • USEC ports continue to see challenges with vessel congestion and some vessel strings still omitting Charleston and Savannah entirely. Erratic vessel schedules continue to cause significant challenges with changes in posted earliest return dates and vessel cut-offs at the port. For USWC, arrivals and available capacity for LA is generally open whereas Oakland and Seattle are more fluid.
  • Potential strike action with the railroads this week have led to immediate stoppage of hazardous as well as reefer shipments by the ocean carriers if rail transport is required.
  • Rates: No GRI’s announced for September.
  • Capacity/Equipment: Deficits on containers and chassis continue to plague Inland Port Intermodal (IPI) origins. Chicago has been the most reliable. Availability for standard equipment has not been an issue for most ports. Capacity from the US Southeast to India remains constrained due to continuing port omissions for Charleston and Savannah. Overall capacity for Indian ports requiring a transshipment service remains very tight from both the USEC and USWC.
  • Recommendation: Please place bookings 4 weeks prior to vessel Estimated Time of Departure (ETD).

North America → Europe

  • Congestion issues persist in Europe but are reported to be improving. Hamburg is experiencing the most significant congestion at present. USWC service to Europe remains extremely tight due to void sailings and skipped ports caused by systematic delays. USWC coverage for Mediterranean ports has reduced capacity due to one string being phased out.
  • Potential strike action with the railroads this week have led to immediate stoppage of hazardous as well as reefer shipments by the ocean carriers if rail transport is required.
  • All carriers continue their booking stop for shipments to Ukraine, Russia, and Belarus.
  • Rates: No further GRI announcements for September or October.
  • Capacity/Equipment: USEC service to Northern Europe has capacity available however Savannah has irregular challenges due to it being omitted on certain vessel strings. Vessel capacity from the port of Houston has been very tight due to a significant increase in demand and delayed vessels.
  • Deficits are still plaguing many 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.

North America Vessel Dwell Times

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Air Freight Market Update

Asia

  • N. China: The market is very weak due to continued low demand and the short working week. Rates have dropped to their lowest level YTD and carriers are eager for cargo.
  • S. China: After the long weekend cargo demand remains soft and rate levels similar to last week. The market continues to see 1-2 days of additional transit time in regards to the Shenzhen-Hong Kong border situation.
  • Taiwan: The market remains slack after the Mid-Autumn Festival long weekend with no signs of strong demand for the week. Carriers continue to lower rates in order to attract cargo.
  • SE Asia: Demand out of Southeast Asia remains soft with rates either maintaining at similar levels or decreasing slightly from last week.

Europe

  • Capacity and demand on Transatlantic tradelanes remain constant. On the Far East Westbound (FEWB), the situation continues to be volatile due to on-going lockdowns in parts of China.
  • Demand is expected to pick up towards the end of September.
  • Many airlines are expected to cut capacity for their winter schedules, which could cause further capacity constraints and push rates up in the upcoming months.
  • Jet fuel prices continue to slowly decrease.

Americas

  • Export demand remains steady from all markets.
  • Demand to Hong Kong has seen a large increase.
  • US airports are running at a normal pace.
  • Capacity is opening up further, especially into Europe, where most carriers have increased the number of passenger flights for their summer schedules.
  • Shipments into Europe could experience additional destination dwell time due to the labor shortages in some western European hubs.
  • Rates remain stable week over week.
  • A heavy travel season in and out of Canada is putting a strain on the infrastructure of major airports (Vancouver and Toronto in particular) which is having a trickle-down effect on cargo operations. This is resulting in longer than normal dwell times for both import and export cargo.
  • Air Canada has announced they are gearing up to add additional flights out of all major gateways. These flights are likely to include both passenger and freighter options.

Trucking & Intermodal

UK

  • UK trucking traffic is being impacted by extremely low water levels across the continent. This has brought inland navigation close to a full stop. Barges temporarily cannot go on the Rhine past Cologne, blocking the whole Western/South-Western part of Germany from being serviced via waterways. Low water fees apply for inland barge terminals in Germany & the Netherlands, as barges can only take half loads. This is putting pressure on Rotterdam/Antwerp capacity, as 38% of all containers move to/from Rotterdam via waterways, resulting in overbooked rail and truck options.

Americas

US Import/Export Trucking: Market Trends

  • Canadian congestion continues with yard utilization >90% across the board, along with continued rail congestion. Efforts to mitigate congestion in Toronto and Montreal include CN opening additional relief container yards which could potentially impact drayage rates.
  • Chassis shortages persist, notably in Chicago, NYNJ, Memphis (95% utilization, 10+ day street dwell time) and in LA (9.8 day street dwell for 40’, which is down ~1 day from August).
  • East coast and gulf congestion continues with vessels at anchor in New York and Norfolk. Savannah congestion has increased to 42 ships (up from 36) awaiting berths at the end of August, with wait times in the 9-18 day range. Import container dwell time averages over 10 days.

US Domestic Trucking: Market Trends

  • Tender rejections by carriers have decreased by 70% YoY from 20.8% to 6%, meaning carriers are accepting more loads due to having more capacity.
  • Spot rates crept up in August by $0.02/mi after bottoming out at a 16-month low (down ~35% YTD). Contract rates followed after edging up for several months due to fuel surcharge (FSC) schedules.
  • Load-to-Truck ratios have leveled out going into Q3 but are still down ~33% YoY. This is the key barometer for supply/demand in the marketplace.

Customs and Compliance News

CBP Lifts Withhold Release Order

U.S. Customs and Border Protection announced the modification of the Withhold Release Order (WRO) against Natchi Apparel (P) Ltd. garment imports. Effective September 7, Natchi Apparel shipments will be allowed to enter U.S. commerce, including shipments that have previously been detained. CBP lifted the WRO due to sufficient evidence that Natchi Apparel (P) Ltd., located in India, had addressed all five of the International Labour Organization’s indicators of forced labor identified by the WRO.

Delegation Petitions for Section 301 Action Against Mexico

On September 8, a bipartisan group of Florida’s Congressional delegation filed a petition with the Office of the U.S. Trade Representative (USTR) requesting the initiation of a Section 301 investigation into certain Mexican agricultural products. The petition alleges Mexico's trade practices rise to the level of export targeting, and pose a threat to the Florida agricultural industry, U.S. food security, and consumer pricing.

Factory Output news

  • Mainland China: Chinese auto exports surged 65 percent year-on-year and reached a record in August. Source
  • Cambodia: Exports to the U.S. reach US$7 million. Source
  • Thailand: Thai Government continues building the new S-Curve industries, targeting Electric Vehicle and Hi-Tech industries. Source
  • Sri Lanka: Merchandise exports increased by 2.25% with apparel & textile leading the charge. Source
  • Bangladesh: Apparel exports from Bangladesh lowest in the past seven months. Source
  • Pakistan: Trade between Pakistan and Latin America shows significant increase. Source

Freight Market News

Railroads cut service in preparation for potential strike

According to SupplyChainDive, the four largest US railroads have begun limiting service on Monday in anticipation of a potential rail strike. Currently the two of the largest labor unions and contracting rail lines have not been able to reach an agreement. A nationwide rail strike could generate $2 billion in lost economic output per day.

Capacity Demand for Chinese Exports Decline

According to The Loadstar, with inventories in the US and Europe reaching near capacity, demand for Chinese exports is on the decline. This aligns with the decrease in spot rates to both the USWC and USEC.

Flexport Research Updates

Weekly Economic Report: U.S. Imports Pull Back

U.S. imports were down from June to July, while exports rose. For imports, this continues a pullback that dates to March 2022. Looking back to the onset of the pandemic or even the year before, though, imports have shown substantial growth.

Pack It In - Corporate Inventory Challenges

Have corporate inventories gotten out of control? Have all industries seen similar trends? What are firms doing to manage the inventory aspects of their supply chains? This report finds that, in the aggregate, corporate inventories have rapidly moved from being inadequate to being at, or even above, pre-pandemic levels.

A quick reminder: the weekly economic report is now its own newsletter! You can sign up here to have these insights delivered directly to your inbox each week.

Air Timeliness Indicator: TPEB ↓ @ 10.4 days, FEWB ↓ @ 8.9 days.

Ocean Timeliness Indicator: TPEB ↑ @ 88 days, FEWB ↓ @ 95 days.

Logistics Pressure Matrix

  • US: Inbound, containerized ocean freight volumes fell by 0.8% year over year in August, but remain 14% above the same period of 2019. Ocean freight times nonetheless continued to improve, while shipping rates fell for a 12th straight week.
  • EU: Ocean shipping rates are down to July 2021 levels. The timeliness of the first stage of ocean shipping improved to the best since December 2020.

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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