Market Update

Freight Market Update: September 16, 2020

Ocean and air freight rates and trends; customs and trade industry news plus COVID-19 impacts for the week of September 16, 2020.

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Ocean Freight Market Update


Asia → North America (Transpacific Eastbound)

  • Rates: Increase; Open Carrier: $4,350 WC // $5,200 EC
  • GRI September 1: $400-$600 To USWC; $500-$600 To USEC
  • GRI September 15: $500-$600 To USWC; $600-$700 To USEC
  • Capacity: No more bookings accepted for month of September.
  • Notes: We can expect anywhere from $100-$200 GRI mitigation before end of this week for all carriers besides COSCO/OOCL. Expect space to continue to be tight in the next few weeks as shippers rush to get cargo out of China before October. This is peak of peak season. All services are 110% utilized until at least end of Sept. Premiums like ZEX and EXX are also full. HC EQ shortages across all carriers throughout Asia, encourage using 40’ ST.

Asia → Europe (Far East Westbound)

  • Rates: Increase (Effective Sept. 15 North Europe main ports in the range of USD 1800-1900 per 40’ST with UK add-on and 40’HC add-on on top)
  • GRI September 1: Implemented
  • GRI September 15: Partially Implemented
  • Capacity: Recommend advance booking notice at least 21 days prior to CRD
  • Notes: Market expected to be strong and full throughout September with the lead up to China’s Golden Week the first week of October. Demand will probably remain high until end of October. Equipment shortages continue especially in China and Vietnam. Best to work with equipment substitution wherever possible (40’ST and 40’NOR instead of 40’HC, which has the most severe shortage). Carriers have announced blank sailings for post–Golden Week so capacity will be tight.

Europe → North America (Transatlantic Westbound)

  • Rates: Steady
  • GRI September 1: Not Implemented
  • GRI September 15: Not Implemented
  • Capacity: Recommend advanced booking notice 21 days prior to CRD
  • Notes: Fully utilized vessels to north US East Coast across ocean alliances, more space is available to south and Gulf destinations. Space will remain tight throughout October and the market is expected to be strong until mid Q4. THE Alliance is curtailing capacity with blank sailings: the AL1 and AL4 service will be voided in week 41 and 43, representing a reduction of approx. 5% and 11% of capacity in the respective weeks.
  • Delays continue at Canada East Coast ports as carriers work to clear the backlog of import containers resulting from the 2-week strike at the port of Montreal during July/August.

India → North America

  • Rates: Steady
  • GRI September 1: Implemented
  • GRI September 15: Not implemented
  • Capacity: Recommend advanced booking notice 14 days prior to CRD
  • Notes: Rates are still very high and space is tight. More space available to east coast compared to the west coast. Equipment is a big issue in the Indian Subcontinent. Please provide forecast to your forwarder prior to CRD to ensure equipment is available.

North America -> Asia

  • Rates: Steady
  • GRI September 1: No GRI announced
  • GRI September 15: No GRI announced
  • Capacity: Recommend advanced booking notice 21 days prior to CRD

North America → Europe

  • Rates: Steady
  • GRI September 1: No GRI announced
  • GRI September 15: No GRI announced
  • Capacity: Recommend advanced booking notice 21 days prior to CRD

Air Freight Market Update


Asia

  • After two very quiet two weeks in China, yields are headed north in a market expected to accelerate heading into the mini peak ahead of the Golden Week holiday during the first week of October. This despite the holiday’s being effectively shortened by China’s mandate that two days usually spent away from work be dedicated to full production.
  • Slowing the product-launch calendar is the delay of the iPhone 12 launch by about a month and a reduced forecast for Sony Playstation 5 after production issues with its core processing chip. While Sony is likely to ship about 35% fewer consoles than projected, the iPhone should hit its production forecast but ship in a more compressed timeframe that could put extreme pressure on capacity and send rates spiking from October 15 to December 1.
  • Southeast Asia markets are all very strong with tight capacity and high rates the story across the board. A large rate differential of almost $4 per kg opened up between SE Asia and mainland China last week but this gap will close as rates increase exit China this coming week.

Americas

  • The TAEB and TPWB trades can be accessed without any major constraints, a return to the status quo compared to prior weeks.
  • Oceania is heavily congested and calls for extreme rate levels 3x the usual market.
  • LATAM SB looks to stay capacity constrained, especially for larger shipments that may endure long transit times and splits. The US flag carriers are re-introducing limited capacity into several key markets in LATAM over the coming weeks, bringing a bit of relief though rates will remain well above historical norms.

Europe

  • Overall market situation is status quo week over week.

  • We expect FEWB demand to increase as we head into the Golden Week holiday in China.

  • On the TAWB, capacity and rates are relatively stable but it is highly recommended that bookings be placed 3-5 days in advance of CRD to ensure the appropriate space can be reserved.


Factory Output News


China Mass testing is underway in Yunnan, China after the city confirmed two imported cases of COVID-19 [Source]

China Samsung announced it will close its TV factory in Tianjin, China by November, continuing the South Korean firm’s trend of moving production away from China. TV production will shift to Vietnam and Mexico among other markets. [Source: Nikkei Business Review]

Indonesia Jakarta has been placed back on lockdown starting September 14th for a minimum of 2 weeks in an attempt to alleviate the capitol’s overburdened healthcare systems. Freight transportation activities will continue as essential services but delays should be expected. [Source: CNA]

India No further lockdown plans announced as India coronavirus cases surge to 4.85 million source]

United States Manufacturing production slowed in the month of August, rising only 1.0% last month after advancing 3.9% in July. The Fed noted that “the gains for most manufacturing industries have gradually slowed since June.” Factory output remains 6.7% below its February level. [Source: Federal Reserve]


Updates from Flexport's Customs & Compliance Team


CBP Reacts to Forced Labor in China The Department of Homeland Security announced it has implemented 5 Withhold Release Orders (WRO) on products from China where it found state-sponsored human-rights violations had occurred. The WRO's cover products produced by specific companies in the Xinjiang Uyghur Autonomous Region and include the categories of apparel, cotton, hair products, and some computer parts.

AD/CV Comment Deadline Extended The Department of Commerce issued a Federal Register notice that extended the comment period by 14 days to September 28th. The comment period is open for the trade community on large changes proposed to the AD/CV, including the ability to retroactively suspend liquidation and require a cash deposit on the results of a scope decision.

E-Phytosanitary Certificates in ACE CBP posted a notice that beginning on September 26th ePhyto's will be accepted in ACE. Importers can still submit original paper copies, but the new process is meant to be more streamlined for all parties. There will be trade calls on October 13th and 14th to address any issues.


Economic Highlights from Flexport Chief Economist Dr. Phil Levy


  • Few inflation worries have come to pass so far. In the wake of extraordinarily expansive monetary policies from the US Fed, there have been concerns about potential inflation. But there’s still little evidence of inflation above the Fed’s 2% target in standard price measures.
    • The US Consumer Price Index (CPI) rose 0.4% in August, following more substantial increases in June and July. Over the 12 months leading up to August, inflation was 1.3%.
    • The US Producer Price Index (PPI) rose 0.3% in August. The index was actually down 0.2% from 12 months before.
    • Treasury bond yields show inflation expectations averaging 1.53% over the next 5 years.
  • Weekly unemployment claims remain high and flat. First-time US filings for unemployment insurance matched the previous week’s revised 884K. This suggests a level of ongoing job separations inconsistent with a rapidly recovering economy.
  • European economic recovery will take a while, according to updated ECB projections. They show the euro area matching end-2019 GDP by late 2022.
    • ECB President Christine Lagarde said appreciation of the euro had partially offset monetary stimulus for the area.
  • AmCham China survey shows companies committed to China and skeptical about trade peace. In a regular survey of US companies operating in China, just 14% thought geopolitical problems would be solved within a year, but 75% rejected the idea of shifting production out of China.

Freight Market News


China Tells Carriers to Restore Capacity Chinese transport regulators have directed major container lines to restore blank sailings and limit aggressive spot rates, reports the Journal of Commerce. Whether the guidance has teeth remains to be seen, although one carrier suspended this week’s GRI as a result.

US Imports Surge Despite Forecasts Gloomy outlooks from April have been crushed by a rush of goods congesting West Coast ports and backing up inland distribution routes. According to the Wall Street Journal, 2.06m containers arrived at US ports in August, more than any August on record since 2002.

Oil Takes Another Wallop Crude oil prices are slumping, due to low demand from the US and China. OPEC reversed Covid-related production cuts in August, but US inventory is still at its highest for the time of year since 1991, reports Bloomberg News.


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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.

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