North America Freight Market Update Live

The below transcript has been generated by an AI system and may contain inaccuracies, errors, or omissions. While efforts have been made to ensure the accuracy of the content, the AI-generated transcript should not be considered fully reliable or definitive record.

Nathan Strang

Hello, everyone. Happy Thursday. Welcome to this month's freight market update. My name is Nathan Strang. I am director of Ocean Freight here at Flexport. Another great webinar lined up for you today, but we're gonna go through a couple of housekeeping notes before we start. On your screen, you're gonna see the main stage here. And then to the right of that, you're gonna see a little sidebar over there. There's a couple, tabs that you should take a look at. One is chat in there. You'll already see Carol, putting the thank you in. She'll drop any administrative notes in there, during the during the webinar, any links to things that that might come up as a topic, any any, sort of technical notes. Next to that, you're gonna see docs. Docs is more of a links list. So in there, you're gonna see, registration for our next FMU in July, our live tariff blog where you need the most up to date information on what's going on in the tariff landscape, our ocean timeliness indicator so you can track door to door on time performance, Flexport Atlas, which is our active world globe that shows you every ocean service in the world, and then also, very exciting, today's slides. So if you want to download the slides, take them back to your team in your office, you can go ahead and do that there. The last tab to look at is q and a. In there, you can drop any questions that you have. So if you anything comes up and you want a little bit more clarity on something, a little more depth of information, or something we simply didn't cover today in the webinar and you wanna ask a question on it, go ahead and put the question in there, and one of us will will get to it. Alright. Now a brief legal note before we kick off. Please keep in mind that all information provided in this session is based on the situation at this current time and may not be customized to your specific business requirements. We always recommend reaching out to a Flexport expert to discuss your particular situation. Onto today's lineup. Again, my name is Nathan Strang. I am director of Ocean Freight. With me is Kyle Beaulieu. He is senior director and head of Ocean Americas. And David Grinevald, who is our regional director for air freight at Flexport. The lineup, I'll be covering an operations update. We're gonna go over to the Transpacific update with Kyle for Transpacific Ocean and then a global air freight update with David, and then we'll get into our q and a. This month, we're gonna bring back our poll questions. So this is something that comes up, every now and then. We like to get an idea of where the market is sitting from your perspective as a as an importer or exporter. So the question that we're asking, right now is what are your current inventory levels? So if you go over to the polls tab, you're gonna see a couple, different options there. Too much, too little, have what I need, or, you know, NA, I just wanna see the results type of, enhancer. But, we really find this valuable. I think it's really great information. It adds context to kind of what we're discussing in the in the webinars. So, really encourage you to to to drop in your answers there. Alright. Now on to operations. I wanted to start this month's webinar with a little bit of a news update just because I think the news is driving a lot of what we're seeing in the ocean market. So and in the in the global markets in general. So biggest news this week, of course, is The US Iran, kind of ceasefire armistice, whatever you wanna call it, announcement that was signed yesterday at, in Paris at Versailles. So what that is is the this all the sides have agreed to cease hostilities, kind of a return to status quo antebellum. So the the straits will reopen. Oil is already Iranian tankers have already started moving oil out. The naval blockade is lifted. They're gonna go into a sixty day further talks window about things like, continued mine clearance, nuclear talks, things like that, but ships are moving. So both on the on the global fuel side and on just the container side, this is really good news. But with all things, you know, we see bunker costs have risen pretty sharply. And there's a lot of there's a lot of numbers there. I know. I'm sorry, but I just wanna put as much kind of information on the slide as possible, for you to for you to look at and gain context. But VLSFO flight, chart sorry. Rates in The Middle East are very high. Singapore is still very high. Rotterdam is is probably the best place, and a lot of carriers are bunkering there. But the big thing even with the announcement of the opening of the straits is that's going to take time for everything to normalize. So we're already at depleted, fuel levels. If you heard the president's comments, he said four weeks of fuel remaining globally before, you know, kind of really getting into emergency stockpile levels. So that's going to take time to replenish because as fuel is coming out, we're still using fuel. So it's not really a one to one. Every tanker that comes out doesn't doesn't go a 100% into replenishing stocks. A lot of that's gonna get used in in current usage. Also, ships are gonna be sailing more. Production is gonna increase. So it's gonna take a while for fuel prices to normalize, but we're already seeing it at the pumps in The United States, and we should start seeing it, globally here in the in the next couple of months. US retail forecasts, said that there's gonna be a peak as well, so that's kind of why we're asking the inventory questions. So, National Retail Foundation and Hackett are both saying that we're seeing a a lot of front loading ahead of certain tariff charges, and and changes to things like the DDP regulations. So we are definitely seeing a a bit of a peak on the ocean side. So how long will that continue for is gonna be dependent, upon how much the those retail forecasts hold up. And then, as with everything, it is always the weather likes to come in and and and jump on top of everything. So we're seeing, India, which has become a very critical transhipment hub and kind of, balancing act in the world of global trade. Heavy yard capacity being hit with heavy monsoon season now going into the summer. So, a lot of delays out of out of India, mostly driven by weather now, but compounded on top of the the congestion that they're already seeing due to the due to the Iran crisis. So you can see how all these things kind of line up with each other and kind of create that that situation where we're definitely seeing a peak in volumes and a and a peak in ocean pricing, as we're going here into the the second half of of June. Alright. Larger picture operational roundup. A couple things I wanna call out here. Not much going on on the West Coast Of The United States or Canada. That's pretty much, you know, status quo. Panama Canal is back in the news. So this comes up every, every couple years depending on the El Nino, La Nina cycle. But we're going into what looks to be possibly a drought season in Panama, so they have restricted draft. 15.9 zero nine isn't a huge restriction. The normal is 15.4, but it is a restriction. So carriers are starting to look at that. They're looking at controlling weights, of containers moving through the Panama Canal. So, routing there would have to go around Africa. You can't go around Southern tip of South America, or through The United States via a a rail land bridge if you're gonna try to avoid the Panama Canal. We're not recommending avoidance just yet, but keep an eye on your cargo weights, and it's something to just keep an eye on. South America in general has seen some congestion. A lot of this because extra loaders on the Transpacific, where are those vessels coming from? They're coming from the the Asia to LatAm trade. So Asia to LatAm, especially, is seeing a capacity crunch that trickles into other capacity crunches and equipment shortages. So talk with your, if you're moving out of out of Latin America, make sure that you're talking with your provider and and and getting the latest information there. Europe, still backlogged. That hasn't changed on many slides. We've talked about The Middle East already. We talked about ISC. China, we are seeing congestion there. We're not seeing a huge amount of congestion due to due to peak season. It's kind of, you know, yard utilization that's been persistent. Same with Manila. Singapore and South Asia is actually improving. So the last couple of months, we've seen some some, some heavy delays down there. We now have what I would call more moderate to normal delays. What's interesting is even with the peak, you can see the West Coast Of The US, West Coast Of Canada is normal. East Coast is relatively normal. For last year and going into this year, we have not seen a real operations side peak. So I think that, you know, looking back to, you know, what happened during the pandemic and and the peaks in 2022, 2021, I I think there's been a lot of lessons and a lot of improvements that have gone into the industry that have actually caused them to improve their their destination side handling of cargo. So we are not seeing, heavy operational impacts yet. We're going to keep an eye on it as the majority of cargo starts to arrive in the next two weeks. But right now everything is moving very smoothly, through the West Coast and East Coast gateways into The US. Again, the biggest bottleneck is still that those kind of Northern Europe ports. And that is what I have for operations. I'm going to kick it over to Kyle Beaulieu.

Kyle Beaulieu

Okay. Thank you, Nathan Strang. So first up, another poll question. So in light of current market conditions, oh, yeah. You can go to your polls tab to answer this. In light of current market conditions, when do you anticipate your peak season bookings will occur? Now we have six options here. So, hopefully, that covers, the variety of different, products that you all ship. So we'll be interested to see what what comes about there in the q and p q and a. Now first up, for TPV supply, sort of our normal cut here. So on the supply side, from a deployment standpoint, things are very good. Deployment is basically at full capacity. So the remaining blanks out there are due to service disruptions and a lack of vessels. So even before the current space crunch, actually, not every spring on the trade had the vessels for weekly capacity. So there is some built in blanks that are unavoidable unless the vessel can be pulled from elsewhere, which we'll talk a little bit about in a bit. Despite supply being healthy, there are rolling conditions across multiple networks. So demand is up. So XLs have entered the market, since their last FMU, and also MSC reintroduced the Pearl service, with sailings from mid June. And so this Pearl service serves, Southern China to the PSW, and the XLs were primarily to the PSW as well. So, these things combined has helped clear out a decent amount of roll pools, to that gateway. Now the situation was a little bit different to The US East Coast And Gulf. Panama Canal draft restrictions, combined with full vessels has resulted in weight restrictions being reintroduced on some services to The U S US East Coast and Gulf via Panama. So if you're, someone who ships heavy containers, unfortunately, to those destinations, right now, options are a bit more limited. And carriers are also reluctant to re or to introduce XLs, to those destinations as well, really due to the overall transit time, required to get to The US East Coast and Gulf and the lack of additional capacity. As we turn to our next slide, we'll talk a little bit about rates and maybe why there's not additional capacity out there. So rates have rapidly increased globally. So peak rate now is not limited to PPEV. So searching for vessels isn't quite as easy when demand is up across trades. So peak conditions have hit multiple markets simultaneously in May and June. So rate levels, were already elevated across trades from fuel costs, and now combined with demand, rates have been driven to the highest levels of 2026 across many trades. Why exactly this is happening isn't totally clear. So there's been some theories that are, very US centric, but, clearly, this isn't just a US, phenomenon. So theories out there range from q three bunker costs to tariff responses to front loading for the holidays due to longer transit times. There's likely some truth to each of these, but there's no single reason, driving the simultaneous increase in demand. So what's clear though is that, cumulatively, it has created a huge demand for space, across multiple trades globally. And on TPEB, rates have hit the highs that we saw in 2025. Also coincidentally last June. Though at that time, it was primarily driven by, tariff tariff, conditions in The US. Now on on TPEB, at least we are expecting things to continue as they are now into July, and so there's no reprieve in sight currently. Booking levels over the next few weeks will, determine whether this continues until August and potentially later. Now I'll turn it over to David, and we'll see if similar conditions are playing out in the market on their side.

David Grinevald

Thank you, Kyle. Alright. So on the air side, what we're gonna be looking at today is pretty much a continuation of the trends that we have been, covering in the past couple of weeks. The rates are obviously continuing to rise. Year over year, we are at about 33% higher this year than we were last year. Both the tonnage and the rates have increased week over week, both at about 3% after the holiday decline since we had, three major holidays spanning the entire globe. We had the the Penn Coast, Memorial Day, and the aid. If we look at Asia Pacific, the rates to The US have increased 3% week over week with some markets particularly, tight. Korea being one of them, but South China as well as we will see. Thailand and Malaysia are also two origins where we are seeing a lot of tightening as we get closer to the quarter end. The spot surge is a spot rate surge is also a a phenomenon that we've been seeing, with, spot rates hitting a three year high in May, which is up 41% year over year. The supply and demand balance remains structurally tight, and this is due to, obviously, structural reasons. Actually, if you're interested in understanding why, there are structural reasons as to, the supply of air freight cargo, we're going to have a deep dive webinar on July 8, which will be dedicated to this specific topic. An interesting point to look at as well is the long term contract versus spot rates. At the moment, 52% of global volumes are moving on spot rates, which is just one percentage point below, COVID onset level. We're gonna do our usual now, quick point on The Middle East, and both the airspace and the carrier situation. So I will not go back to the news that Nathan covered already on The US Iran, ceasefire. The situation as far as airspace is, the Gulf Current corridor airspace remains partially restricted. However, we are seeing some airlines coming back, to the region. Notably, Philippine Airlines announced its return to the Middle East routes this week, which is clearly a positive signal. The main hubs such as, Dubai and Doha continue to scale up. The latest reports show that they are at about 70%, of those airports' capacity. The Middle East and South Asia region capacity, as far as carriers are concerned, remains about 28 below pre conflict level. Gulf Area is down 43%. However, the ceasefire creates the conditions for a gradual rebuilding. European carriers, most notably Lufthansa and KLM, remain suspended on Gulf routes. And what we are seeing is that even though the Gulf carriers are rebuilding, we had a a slight dip last week, but this is very, conjunctural, and that was due to the, aid, celebration in The Middle East. So last week, they were actually closer to 80% even though this week they're showing 70%. Fuel cost, again, I will try to keep it brief, but interesting to look at what the, airlines are doing as far as fuel surcharge. What we are seeing is that a bunch of airlines, notably SAS or Lufthansa, have reduced their fuel surcharge. So what I've been doing for you guys over the last couple of weeks, if you look at that table in the bottom right corner, I've been tracking, the amount of the fuel surcharge. Whatever you see in green means that the airlines have actually lowered the fuel surcharge when they were in red. And luckily, this week, we don't have any of them in red except for the supplement that AT hat is, anticipating to start charging on July 1. It means they were increasing their full surcharge. And whatever you see in black is that those fuel surcharges are actually remaining stable. What's interesting to note here is that not all airlines are adopting the same behavior, and that is explained by the fact that they're not seeing the same relief because they're not buying their fuel at the same price. So to keep it summarized and clear, it's mostly stable with some airlines starting to decrease their fuel surcharge. However, what we are seeing is that, we still have some airlines that still charge war risk premium even though those are are easing. One tip that we're giving our customers and listeners is to adopt sort of a hub strategy. China and North Asia currently offer the most stable fuel supply cost profile. So shippers with flexible origin options, we encourage you guys to prioritize this hub to minimize surcharge exposure. Alright. I will try to be very quick on this one so that we can spend a little bit of time on our traditional traffic light slide. The rate peak may be behind us, but what we are seeing is that, the the rates the air freight rates are not going to come down as fast as they rose. This is actually a quote from Zaneta's chief air freight officer, who explained that we should expect a four to eight weeks transition at best. Very related to the point that we that I mentioned on the fact that 52% of volumes are actually moving on spot rates, we're seeing shippers, that are reluctant to move into contract rates. Those shippers that shifted toward three months agreement in q one twenty twenty six, now see their spot rates, actually beating, the contract rates. And now shippers that lock in contract now may benefit from forward concessions. One piece of news that we have mentioned on previous webinars, but interesting for you guys to keep in mind, is that the European Union, is also ending their their deminimit threshold on July 1, which will be removing a key demand driver for Asia to Europe ecommerce lanes. And we do expect to see some softening on the far East westbound lane, in q three as this demand shifts. And last but not least, for those of you who follow those webinars regularly, this is our traffic light. I will not go into every single region, but maybe, spend a little bit of time on North China where the rates remain firm week over week. We're seeing a large surge on project cargo, strong ecommerce demand still, even though some of you might have seen some some numbers saying that the low value ecommerce, volumes out of China have been consistently decreasing. In South China, what we've seen in the last week or so is that we've had a bunch of AOG, that's aircraft on grounds, cancellation that have affected most particularly the services to Los Angeles and Chicago, which obviously has driven some space tightness. Out of Taiwan, the story remains the same because of the hyperscaler and the AI hardware demand for air freight space, so the rates remain elevated. For all three, origin, North China, South China, and Taiwan, we recommend our customers and listeners to book at least five to seven days in advance. Vietnam and Cambodia, we're seeing this quarter end demand that is tightening both the TPEB and the Far East westbound. Malaysia, Thailand, and Indonesia, tight space, we're recommending a ten day minimum lead time due to widespread congestion. Thailand has been extremely tight for the past couple of weeks with terminal congestion that they do not seem to be able to get through entirely. So same thing there, we are advising to book seven to ten days in advance. Indian Subcontinent may be slightly different from what we've heard on the ocean side. The capacity is improving with a slight rate reduction. The rest of the ISC remains quite volatile, and therefore, we are advising that if you have urgent shipment, you should always ask your provider for express status if you want to guarantee uplift. And with that, I will call back Nathan Strang and Kyle Beaulieu to the stage so we can start looking at the results from our two different polls.

Nathan Strang

Alright. Alright. First poll question back up. The question was, what are your current inventory levels? Looks like it's centered pretty heavily on have what I need. That's interesting. You know, too much is way too much is is nothing. A little bit too much. Couple of votes there. Not much and too little. So so it looks like inventory levels are are fairly normalized, which, you know, based on bookings that we're seeing is I don't know. It's it's surprising, but I was expecting to see a little bit more in the in the too little side there than the than the 21% we're seeing. Kyle Beaulieu, I don't know if you have any any thoughts on that one or or David.

Kyle Beaulieu

Yeah. I I'm also also surprised. You know, I do think there has been some reporting out there that maybe inventory levels were lower than they've been historically. So there have been some theories that the uptick in demand was was related to that. Clearly, I guess, not the case for for this group. I would say one thing that I, have seen so far is there is a there has been an increase, in request for sort of fast flow expedited services, over the past few weeks, but not a huge increase, which might kind of correspond with this. Right? Because if you, really need it, you might, use those fast boat services. But if you, maybe don't need it quite so quick, then then that's not some place you might go to. David, what what is your thoughts on the air side with this?

David Grinevald

I actually agree with that. This is, this is pretty much the same thing that we are seeing, on the air side. And and also going back to, I think, the, the data that was quoted from the, the National Retail Federation in Hackett, I think it goes to show that there there should be a peak season, even though it might be shorter than what we are used to, but, that's what we're anticipating on the air side as well.

Nathan Strang

Alright. Let me take a look at our at our second poll now. And this one is, in light of the current, market conditions, when do you anticipate your peak being? Now. Yeah. I mean, that makes sense. That's what we're seeing in the market. We are seeing it, for sure in in terms of booking. Kyle Kyle talked about it in in terms of you can see the rates, you know, driving that as well. A little bit more kind of in the than the August, September peak. That's kind of what we saw last year. It was a little bit of a double peak. We saw a strong peak early in the in the contract year season, the June, July time frame, and then a second one kind of in that, later August, September. And it looks like that's kind of what's what's playing out here. I do see a large number in the I expect bookings to remain steady, though. That's that's also interesting that, you know, not anticipating a peak at all, which there's a JOC article this week kind of about that. That peak really isn't much of a thing anymore, and it's just kind of a a a adding together of circumstances that are that drive the market now rather than a a traditional peak. But, David or Kyle, anything, anything you're seeing in the numbers here?

Kyle Beaulieu

I'd say that it's it's interesting. Those are are relatively well balanced, but they now make sense, given the conditions we'd say out there. But there is a decent amount of votes here for August, September as well. So not quite as strong as that June and July, but, if that holds true that those things stack end up stacking on each other, might lead to a relatively relatively strong August as well.

David Grinevald

And, as as all of you know, us in air usually get our peak season a little later, because, you know, we are, we are kind of helping those importers, that have those goods that couldn't get on a on a boat, to to get over, I don't wanna say last minute, but but slightly later. So, ours would probably be starting in in the August, September, window rather than the the June and July, but let's see what the, the next couple of weeks have in store for us.

Nathan Strang

Alright. Now let's move into we got a couple more minutes here. We could take about maybe five minutes for q and a. We do have an air question to start off, though, David, if you wanna take that one on percentage of air volume going to AI infrastructure.

David Grinevald

Absolutely. So, I'm gonna start by advertising one of Flexport's past, webinar. It's obviously available on our website. I think it was in on May 6. We had a great webinar, from, Alexis, called logistics for the AI era, where they they did a deep dive on that. But to answer the question, in 2025, I think AI infrastructure accounted for about 15% of the global air freight demand growth. So not 15% of total volume, but 15% of the incremental growth added that year. In absolute term, the data center related freight generated about 1,500,000 kg in 2025. This year, the trajectory is sharply upward. This 1,500,000 kg figure is growing at a 40%, year on year rate, meaning that the segment is nearly doubling every two years and significantly outpacing any overall air cargo growth. So this is part of a of a structural super cycle. There is about $600,000,000,000 in hyperscale CapEx in 2026 alone. So to answer the question very simply, it's a lot more this year than it was last year.

Kyle Beaulieu

K. I'm gonna combine a few questions here. We have a couple questions on ISC market, and I think I think notable here. So capacity crunch has hit the ISC market as well. And so what we're seeing there is it just hit maybe a little bit later, than some of the other trades. So it hit sort of main, sort of the main TPEB trades first, and then a few weeks later, it's now starting to hit India, and and the ISC region. So that has upticked, and MSC also, removed one of their services from the market, and so that's created some additional capacity crunch. So, yes, the ISC is is getting the crunch that others are. It just started a little bit later, and I think with that, I think what's to be seen is whether it goes a little bit longer, than the rest of the trades. And then overall, there's a question on on Sri Lanka. So, you know, balancing cost and transit time. I'd say right now, there's not really a great route, to avoid some of the cost increases. So, you know, the routing to The US West Coast, we did see those rates increase first. The reason for that is because most, know all those services, go, via traditional TPEB lanes, and so they they got a cost increase from that. But the cost increases are also coming to routing via The US East Coast as well. So, depending on, what your final destination is, either of those options, are still out there and still still available, but the cost, it will be there.

Nathan Strang

Okay. I know we're a little over time, but we got one more unanswered question from Brandy. I know it's a bit of a crystal ball question, Kyle, but what do you see where do you see rates going?

Kyle Beaulieu

Right now, rates are they're projected increases for July. So rates have gone up, here for for mid June. Don't expect any sort of, decrease to that over the rest of the month. Booking levels are elevated into July. So right now with that, cost increases are expected as well.

Nathan Strang

Okay. I think, unfortunately, there are a couple a couple more came at the end, but, unfortunately, we are over time, so we do have to kinda move on here. Thank you. If we didn't get to your question, that question will go to one of our Flexport experts. So, hopefully, they can reach out to you with a with an answer for that and and offer you a little bit more detail. Also, anybody you see on any of these webinars is available to join you and your company to talk about all this stuff in-depth. Just reach out to your Flexport team, and they can, schedule us to join you for, for a one on one session. So, thank you all for joining. Again, the next one of these is on the July 16. We have always have other webinars going, so go to flexport.com/webinars. Check out our tariff blog. And, again, if you have any questions, reach out to us, and we'll be happy to answer them for you. So thank you all again for joining, and we'll see you next month.