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.

David Grinevald

Hello, everyone, and thank you for attending today's freight market update. My name is David Grunewald. I am the director of air freight for The Americas here at Flexport. Today, we have a great webinar for you, but before we begin, a few housekeeping notes. On your screen, you will see a sidebar to the right of the main stage where you can submit questions. At the end of the presentation, we will host a q and a and answer a few audience questions, so be sure to get your questions in early. In the same sidebar, you will see a tab labeled docs. This is where you can download a copy of today's slide and find other helpful resources to navigate the market.

Okay. Now a brief legal note. 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. Joining me today are my colleagues David Gempel, senior manager of regional ocean management, and William Contessa, manager of ocean procurement.

So today's agenda, David will kick things off with an operational update followed by an Indian Subcontinent update with Will. Then I will cover air freight, and lastly, we'll close it out with q and a as we always do. And with that, I'd like to invite David to the stage for the operations update.

David Gample

Thank you, David. Happy to have two Davids on the call today. We're gonna jump right into the operations update for Ocean. Looking at our operational impact roundup here, four items to call out for everybody. Starting with the Los Angeles Long Beach Port Complex, to note, the Vincent Thomas Bridge closed beginning on November 7. This is actually, rather big news. To note, the bridge handles roughly 53,000 vehicles daily, including thousands of trucks traveling to and from the port, of course. The closure, is expected to make local trucking quite difficult in and around the complex. And in terms of the duration, constructions plan to last roughly sixteen months all the way through early March twenty twenty eight, so it's quite lengthy. The main effort is a $750,000,000 deck replacement, which is being led by Caltrans.

Shifting over slightly to the east, looking at the Panama Canal, some, good news there. They have actually increased the daily transit capacity to 34 vessels by adding a super category reservation slot for the Panamax Locks. And improved freshwater lake levels actually allowed the canal to raise the maximum Neo Panamax draft to 50 feet, very slightly easing, those recent draft restrictions put in place. So a little bit of good news there.

In terms of the ongoing disruptions, further east, specifically the Strait Of Hormuz as well as the continued impact from the recent typhoons in China, we're now seeing some secondary effects occur in the market, in particular in Southeast Asia's transshipment network. In particular, Singapore is now experiencing some of those trickle down effects, which is a rush of cargo into that port terminal complex, which is causing some significant delays at the transshipment port. Singapore is, of course, the largest transshipment port in the network in the Far East, so we are seeing significant delays as a result there. And finally, a callout for Europe. Those low water levels continue. There is a renewed decline in the water levels on the Rhine River, and regular barge operations are once again being affected. Maersk actually reinstated contingency surcharges for cargo moving through two inland terminals as renewed, low water conditions disrupted their operations in particular. These measures apply to inland movements starting November 3, so already in place, and they're expected to remain in place until operating conditions improve.

One fun call out here. I want to let everybody know that the, map you see here is actually a screenshot from Flexport's Atlas product, and all of the news that we're discussing right now immediately can actually be found live. If you navigate to atlas.flexport.com, you will see this map. I prefer switching to the Mercator view. You can do that in the top right. And then you'll see there are actually a few dotted orange exclamation marks throughout the tool. When you click into that, you'll actually see some of the, disruptions that we discussed here amongst others, and we do have both a brief description as well as links to the news articles for you to read further should you wish. So very cool tool. It's incredibly helpful on your day to day.

Moving forward, I think one of the top, items to discover... To discuss today in terms of news stories for everybody is, of course, the LA Long Beach strike deadline. That deadline moved to November 20 after a third extension. The PMA and the ILWU local twenty six extended that contract out to November 20. And, again, that was the third contract extension since the initial November 1 strike threat. So for a quick overview, about 250 watchmen work at six container terminals, and those terminals handle more than half of port complex cargo, which includes roughly 85% at Long Beach and 33% at Los Angeles ports. Other unionized labor, aside from the watchmen, is not expected to cross a local 26 picket line, So a strike could potentially stall any inland movement of the remaining holiday holiday, cargo rush that we're seeing.

Talks actually began after the contract expired in July 25, and more sessions are scheduled over the next two weeks. I think it's super critical to point out and note for everybody that this is separate from the coast wide contract that covers all West Coast ports. That contract actually runs through 2028. So for what we're seeing today, Oakland, Seattle, and Tacoma are not part of this dispute.

Moving along to what's actually happening on the ground in LA Long Beach, we're seeing, cargo surges, as a result of this extended peak season to the tune of 230 to 300,000 TEUs, per week. Current port data is showing that estimated range is expected to arrive in Southern California over the next of each, three weeks. So for reference, a level of 200,000 TEUs is considered a busy week. So, of course, on the heels of this strong peak season, we're seeing, continued elevated levels hit the LA Long Beach Port Complex. For reference, for September, Los Angeles saw 1,040,000 TEUs, which was plus 18.1% year over year. Similarly, Long Beach saw, a surge, which was plus 25% year over year for September. And the Port Of Los Angeles set an all time monthly cargo record in September. Not a surprise, I think, to anybody on this call.

Alongside those surges in volumes, we're seeing the NRF raise their q four import forecast. They updated their projections, for October to 2,260,000, November to 2,050,000, and December to 2,030,000, which are up ever so slightly, about 1% from last month's projections. As also noted, September import volumes reached record levels, and it was one of the busiest months on record. And so what we're seeing is the continued strength of inbound volumes underscoring the length of this ongoing peak season.

Finally, I wanna touch on very briefly the CBP issuance of an interim final ruling. So on November fifth of last week, CBP filed, that IFR IFR to establish a new requirement for foreign importers of record, IORs. At a very high level, amongst other requirements, licensed customs brokers will be responsible for verifying their overseas clients meet certain qualifications before filing entries. This is expected to become effective beginning 01/05/2027. To note, we have our customs experts touching on this very topic next week. We have an, webinar on November 19. If you have not already signed up, I encourage you to do so. It is titled tariff trends 2026.

Finally, I'll go into one specific chart. You have actually seen this if you've been on any of our previous webinars. I think it's important to cover the, LA rail dwell situation in light of how strong this peak season has actually been. So comparing to, last month's presentation, this chart shows us the four week average dwell currently at LA Port and Long Beach Port Complex, for cargo headed to inland hubs, IPI hubs, Salt Lake, Columbus, Dallas, Chicago, and Kansas City. On the left in gray, you will see those rolling four week figures from last year, And then in blue, you will see the rolling four week figures for this year. No surprise to anyone. It's a significant increase. For this year, the average dwell right now on a rolling four week basis is eleven point six days in LA Long Beach. In particular, I wanna note when comparing to last month's rolling, four week view, it was nine point one days. So we have seen a slight uptick in the dwell at LA Long Beach. Again, should not be a surprise to many of you, but something to call out on the continued strength of this year's peak season. So with that, I will hand it over to Will Contessa who will help us with ISC.

William Contessa

Thank you, David. Appreciate that. Hi, everyone. My name is William Contessa. I'm gonna walk through a brief market update for ocean shipping from in the Indian Subcontinent to The US. So if you've been shipping on the trade over the last, you know, five six months, you've been experiencing a very, challenging space constrained market. You know, what what we've seen is that, since May and June, strong demand levels and constrained capacity have driven the market to this sort of extended peak season we find ourselves in. That said, that peak, has certainly reached its apex and and the market is softening. You know, the demand, the cargo demanded from the region has reduced from those healthy peak season levels that we saw in July through October, enabling, saying, you know, this balance of supply and demand to more return to something, normalization than the constraints we saw this summer.

From a demand perspective, let's touch just quickly on recap of the story of the last few years. So twenty twenty five volumes from ISC in India to The US, were a little bit muted, especially in the second half due to the Russian energy tariff, placed upon imports from India to The US, and just, of course, the broader, you know, tariff uncertain environment importers are dealing with in The US currently. But, you know, we saw an initial bounce back in our q one of twenty twenty six. So recall that the Indian, fiscal year is a quarter behind ours. So for them, that... What we experienced as an initial q one volume bump, is shippers getting cargo off the docks, to help finish out their books, for the financial year at the start of their q four. So we saw an initial volume bump from that, but then from April into May, things really ramped up and got going as volume increased pretty largely upwards of 40% in certain corridors there. So all that increase in cargo for the peak season to support back to school, holiday related cargo getting into stores, onto shelves, and into consumers' hands by the end of the year here.

Those increases... Those volume increases have concluded. The additional export volume that was happening from India to all global markets, not just The US, leading into the Diwali holiday, which is now ongoing and anything loaded prior, will have gated in. That additional volume has now retreated as well. So we're we're in this environment where market continues to soften and reduced demand levels could, continue that softening, but we continue to have this looming uncertainty both from a positive and negative perspective for India on all things tariffs, important to The US and how that can impact cargo demand.

Now from a a supply perspective, again, quick recap, early in the peak season, the market capacity, for ISC to US increased, took a big chunk. So, you know, in in June 1, there were six direct services from Northwest India to The US East Coast. By end of July, there was four. And so what we saw is that approximately the nominal market capacity for ISC, Northwest India to The US East Coast reduced about 28%. And so when you have a big chunk of market capacity get removed right on the major corridor, right as there are healthy peak season demand levels materializing, what you get is a constrained market and that's just what we were dealing with. That became worse due to a cluster of blank sailings at the wrong time, smaller carrier ships on those particular calls on the server string, and of course growing port congestion at the major ISC hubs as a trickle down from the Gulf War impact.

And so, you know, that Gulf War impact, a good way to quantify it is, you know, for container throughput throughput globally, for the first half of twenty twenty six, there were three ports in the top 30 of the top 30 ports in the world that have grown their volume more than 10% in the first half of twenty twenty six. Two of those are ISC ports, Nava Shiva in India and Colombo in Sri Lanka. The reason those ports have seen their volumes grow so much is they are taking on more cargo, that ultimately gets to the Persian Gulf, gets to or from the Persian Gulf, that right now, has been impacted by the ongoing situation in The Gulf there. And so all these factors have really materialized, through the last number of months to make a very constrained market environment. Now that said, in October, in November, we've seen that start to get better as capacity has sort of continued to be a little more normal and a little more easier to secure on our normal cadence.

What has actually helped drive that balance of supply and capacity from the supply side? So we have Suez routing returns. So for the ISC, Northwest India to US East Coast, then we have four services. Just a little below, they're described here as a quick reference. We have three services that are moving through the Suez Canal, and then one service that continues to move around the Southern Tip Of Africa around the Cape Of Good Hope there. But when the service strings start to go through the Suez and the routings and transit times get shorter, that puts extra capacity back into the market because the lane doesn't take as long to serve and ships can make their cycle through faster. We saw a little bit of extra loader capacity support ISC to East Coast volumes. We've seen vessels both on a one vessel only and a broader for the service ring upsizing. And again, as demand has decreased outbound from India globally, that has helped reduce some of the port congestion, All of that really materializing in this, improvement in the origin experience where we're seeing lead time normalized, to what we've grown to expect in a standard market situation here.

So that said, when we're looking at the demand, the supply, where does that put us as a market outlook outlook looking forward? So the market, from India and the ISC Subcontinent to The US is likely, to continue to soften through q four here unless it experiences one of one and or any combination of the three big disruption factors here. Number one, an unanticipated demand increase. So for a couple of years, there's been ongoing chat talk about a potential India and US trade deal. If that were to happen, that would increase volume from from India and thus impact the market that way. We could see a reduction in supply. You know, if there's too much capacity, how will the asset owners react to that? And, of course, our favorite, disruption, disruption, disruption. We can only take on what's next as it comes. And that said, I'm gonna turn it over to David to walk through an air freight update.

David Grinevald

And thank you, William. Okay. So for those of you who regularly ship air freight, I am sure you all know that we are now in the thick of peak season with spot rates rate rising for a third week and the TAC index reaching its twenty twenty six high. If we look at the market as a whole, the globe... Global spot rates rose for a third straight week. We've seen them up 4% in week 42, then 5% in week 43, and then again 4% in week 44. The TAC index, which is one of the main index that air freight shippers and and professionals look at and track, has actually hit its twenty twenty six high, and the Baltic air freight index, which is another one of those, gained 6.6% in a week. We are now well past the last two peak season highs. The rates have been... Are now up 28.2% year over year. So if you are a regular FMU Live listener, you will notice that the gap, is actually reducing, because we were well above 30% higher year over year in the previous month, but we are remaining in that same ballpark. And for shippers, you... They can definitely feel the burn of of rates being much higher.

The October tonnage grew 6% year over year led by Africa, and Middle East and Southeast Asia, but APAC also did a plus 7% there. So we can see that the demand for air freight is nowhere near, slow. We will see, in one of the next slides that, AI and high-tech cargo very much drive the Transpacific trade lane, where we see that volumes are up 10% year on year. And Taiwan, which is one of the main origin for this AI and high-tech cargo, is up 26%. If we look at Europe, it's a bit of a split picture. Anything coming from China or Hong Kong to Europe went... Fell down a lot. The volumes actually fell 17% in October, which is already four months after the EU introduced their de minimis exemption. But the rates actually rose 9% on the month, and that is simply because carriers are redeploying the EU capacity onto North American trade lanes. And therefore, you have less supply, even less supply than you have demand, and therefore, the rates are still going up.

Okay. So let's do a quick zoom in on what we mean when we say that AI and ecommerce are actually driving the demand right now. AI and ecommerce are actually 26% of global air export, and that's up from 17% only last year. I think what is most interesting is to look at what they actually make up of the 2,200,000 ton of demand growth from January to July 2026. Cloud computing and AI hardware account for a third of that and ecommerce for another third, more or less. We call it 30%. So what what we're saying is that only two types of commodities are actually making up for two third of the growth of air freight in general. It's easy to understand once you realize that AI CapEx is set to top $1,000,000,000,000 by 2027, which translate to about 300,000 tons of cloud demand and 18 extra freighters. And while cloud air demand has nearly tripled since 2022, there are some early signs of it slowing down a bit. I think what is most interesting more than it slowing down a little bit because we need to look at this over longer periods of time is more so the fact that demand outside of The United States now equals US levels, which means that other parts of the world starting with Europe, of course, are starting to get equipped. And so this flux of AI hardware from Asia and Southeast Asia, are now more, more equal, not only to The United States.

When it comes to ecommerce, this is a a theme that we've been touching on for now one or two, FMU live. The United States is actually recovering, and so we're seeing ecommerce come back to The US. Brazil is another one... Another destination where we see ecommerce flows coming back. However, the EU, like we said in the previous slide, is seeing now the fifth monthly drop in volumes. So that is mostly affecting airports like Budapest and Liege where most of the ecommerce volume used to land before the change in in regulation.

I will be quick on today's Middle East updates simply because we think that even though the situation is still very much unfolding and developing, the weight that it has on the global air freight market is normalizing. The conflict is now in its ninth month, And even though there is no ceasefire in force, the market has sort of digested the disruption that this brought. The Arabian Gulf air freight capacity is still 18% below its late February level, and we still see major airlines regularly canceling flights. For example, Etihad has recently canceled Daman and Riyadh cargo through November 19. However, that's why I said that it's no longer affecting the air freight market so heavily, as it did over the previous month. Because if we look at overall demand, it has clearly recovered from the q one drop immediately after the start of the conflict, and our growth is now back near 10% year over year.

This, however, continues to be a very large part of the story. And when I say this, I mean jet fuel. So kind of a bit of good news here, which is that the jet fuel is easing from its peak. And if you look at this graph that we are now showing on every FMU Live, you will see that the line is starting to go down a little bit. That is because jet fuel actually went down 7% month over month. That being said, it is still a 111% higher than it was last year. So we still have a long way to go before jet fuel prices are normalized. And as you know, again, if you are a regular of those webinars, the fuel surcharges that the airlines are charging usually lag the movement of the actual price of jet fuel, and that is because most airlines will actually hedge against jet fuel by buying it in advance. So the same way that when we saw the price of jet fuel jump up, the surcharges took a couple of weeks to adjust. Same thing on the way down. So if you look at the table, you will see that most of the surcharges remain high, and we expect them to hold at this level at least through peak season. Of course, you know, any new US Iran escalation, would probably spike fuel rates within days.

And ending with our traditional traffic light and regional deep dive, this is what it looks like during peak season. A lot of red and a little bit of of yellow, very little green. I will not go through every single line, but just, you know, keep in mind both North And South China, are very tight. We have a little bit of relief from South China and Hong Kong as we've got, extra freighters to ATL, LAX, and ORD, which is adding some space. Taiwan, we mentioned it, still extremely tight with all this AI and and, high-tech cargo coming out of Taiwan, plus, Typhoon Champion creating major backlog. Out of Vietnam, we remain very tight both to The US and Europe. Thailand, I think, is an origin that we have to mention this week because the Bangkok Airport terminal are facing major backlogs. We're actually sending our customers pictures of the tarmac in Bangkok where we see thousands of air freight pilots literally sitting next to the airplanes waiting to be, loaded onto those air... Onto those aircraft, and we're seeing, a lot of airlines actually canceling their flights to Bangkok in light of the current situation. So this is a story that we will be following very closely. If you are flying outside of Bangkok and need guidance, feel free to reach out to us, for, alternative solutions.

Maybe to stay within the theme of William's part on India, we're still seeing major congestion out of Mumbai Airport with lines for the trucks up to seventy two hours to drop cargo, and a little bit of social upheaval in Bangladesh and Pakistan with wage protest, which is, making the trucking part of shipment more complicated as the truckers need to avoid the areas impacted by those protests. And with that, I will invite David and William back on stage so that we can start taking some of the questions that you guys have asked. Maybe we can start with the one question on peak season for you, David.

David Gample

Yeah. Thank you. I will actually attempt to cover... I think there are three questions all related. So starting with the question on peak from Kim s, when do we think peak season will no longer be peak? It's, I think, important to, understand and just remind that the fixed market is directly affected by and runs not necessarily in parallel, but runs almost as a result of what's happening in the spot market or FAK rates. And so the headline right now is FAK rates remain significantly elevated against where fixed rates are. And, ultimately, in order for our peak, as we consider it and specifically when it comes to rates, PSS, PSS normally will only come out of the the market when FAK rates drop to a level where the difference between the two puts downward pressure on that PSS. Right now, the differential is large enough that we're not anticipating PSS to exit the market until, pre CNY. And if it does not, it will likely extend, past CNY. That is a rough projection right now, but gives you a feel for how long strength in rates may last. We are seeing some softening in demand. So when it comes to actual cargo, we're seeing some softening, but not a ton. So it is a question mark how long this surge will last in terms of the demand.

Couple other questions that came up, regarding increase in rail dwell being the sole contributor to, increased volumes. And I'll also talk on CRD changes since a lot of this is is related. So to the question on rail dwell, it's actually not solely attributed to the volume surge. It's actually an interrelation between physical assets on the ground, specifically the rail assets and how many, you know, locomotives and railcars they have to move the cargo, as well as specifically truckers and their ability to move cargo in and out of the port. And a lot of that rests on how much chassis is available. So as networks needed to realign coming out of a lot of the typhoon disruptions, it threw a lot of schedules into disarray. That disruption then led to a lot of trickle down effects, which is what we're seeing happen on the destination side. Every step of the supply chain needs to reschedule and realign as those origin disruption happen, and so we're seeing increased rail dwell partially as a result. The main driver is the volume surge, but it's not the only thing happening.

And then finally, on the CRD changes to, that question, the major, disrupting factor was the typhoons that hit Asia. We did see a significant amount of CRDs change. Of course, nothing could, enter or exit a port while those typhoons hit. And as they last two to three days and you know how you have significant amount of TEU flowing through each port, all of those days where nothing is is happening, no work is happening add up, and the entire network schedule needs to be realigned across every major, vessel operator. So those, delays, they look extreme, they are extreme, but they are a result of those direct physical impacts happening, in Asia. So I'll pause there on some of the the Transpacific Ocean ones. I think there's a question for you, Will, that you can tackle.

William Contessa

Yeah. Thank you, David. We didn't discuss Turkey on the call here today, but there... Did see a quick question about transit times from... For ocean from Turkey to The US. So just wanted to touch... Partially, it will depend on where you're loading, in Turkey if it's at the major ports in southern region of Turkey like Mersin or Iskenderang or, in the northwest aspect of the country in Istanbul and some of the ports, in that surrounding area there. But, generally, looking at about thirty to thirty three days to The US East Coast and, you know, there are limited all water services to The US West Coast from the Mediterranean until you're looking at about fifty days sailing, transit time there. If you have particular services in mind or you're looking to drill down further, definitely suggest touch base, with your account representative here at Flexport. We'll make sure you have all the contacts you need. And then I think we have, one more question for David.

David Grinevald

Yes. I will try to answer this one quickly because we are already running, over time. The question was, how long is the lag on prices after the oil comes down, either bunker or jet fuel generally? This is obviously a tricky question to answer, but what... As a rule of thumb, most carriers will reset on a fixed schedule, which can be weekly, biweekly, or monthly. And they do that against an index average from the prior period. So a fall in fuel typically reaches the surcharge schedule one to four weeks after, and a sustained move is needed before it is passed on. So we would only expect fuel surcharge to start easing if the fuel stays lower for several weeks, which we are only at the very beginning of right now. So, happy to revisit that during our next FMU live in December and see if this is the direction that this continues to take. And with that, that concludes today's webinar. Thank you all for the great question. We will email everyone a link to the recording and the slides tomorrow morning. Thank you again, and have a great day.