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.

Dharshini Shegran

Hello, everyone, and thank you for attending today's freight market update. My name is Darshini, director of ocean freight here at Flexport. We have a great webinar for you today, but before we begin, a few quick 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 slides and find other helpful resources to navigate the market. Okay. Now a brief legal note before we get started. 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. Okay.

Joining me today are my colleagues, Kyle, head of Ocean Americas, and David, regional air freight director here at Flexport. For today's agenda, I'll kick things off with with an operational update followed by a TPV update with Kyle, then we will cover air freight. And lastly, we will close out with a q and a as we always do. Okay. Let's jump into the operational update. Alright. Okay. Perfect. So, what you're looking at here is, actually a screenshot of Flexport Atlas. For those of you who are not familiar, Flexport Atlas is a free tool that is provided by Flexport where you can essentially see live sailing schedules. Not only that, you can even search carrier sailing, schedules such as transit times. You can see port congestion, and it's all available at the tip of your fingers. You can actually access this after the call just by typing into your URL atlas.flexport.com. So feel free to play around with it after.

But what I have here as mentioned is a screenshot that I recently took of what Atlas shows you. My favorite part about Atlas is you can actually see live disruptions, that are relevant to your supply chain, as you're looking at it. So today, I wanna call out a few that might be impactful to some of your businesses. So firstly, if you look, on the far left there, you'll see that in The Gulf right now, there is an icon there that is in either red or yellow that indicates this. But you can see that there is actually a trucker shortage right now in Houston that is severely impacting the dry aged market out there. Due to the driver shortage, we're seeing general increase in demand limited supply, which is obviously driving rates up in that market. If you look just over to the right there, you'll see, where the Panama Canal is. As many of you are familiar, which we'll discuss a bit in the update later today, there are some draft restrictions right now, in the Panama Canal. Luckily, as of recently, we've actually seen some of the draft limits increase, which means that now more vessels can route through the Panama Canal, which is great news because it means we're not restricting the number of vessels routing through the canal. I'll cover a bit more about that in the upcoming slide.

At the top middle there, you'll see kind of an update in the European kind of region. The Rhine River is actually also being impacted by low draft levels, and this is specifically impacting barge shipments, that are running in that region. So we are seeing some additional delays there just due to the draft restrictions, in that region. Over to that middle bottom right portion, as we all know, there is still conflict occurring in The Middle East. Both the Suez Canal and Strait Of Ramuz are running at limited capacity, due to attacks that we're seeing on vessels in that region. So as we all know, that is causing, additional disruption in the market that we should be well aware of. Lastly, moving over to the far right in the Asia region, the most impactful disruption that we've seen lately is actually in Manila, Philippines. There are a backlog of empties, that are triggering congestion in the port, which which have also caused the domino effect and are also resulting in trucking strikes in the region. And so that is also something to just be aware of right now. There's obviously quite a few other disruptions happening in the market, but the reason I like this slide is it kinda just shows that supply chains, are complex and a lot of different impacts all around the world can impact the supply chain. So it's really important to stay on top of of what's happening there. Okay.

Alright. Let's, dive into a few detailed topics. So the first topic I wanna cover here is rail dwell in Los Angeles. So let's first describe what's going on in this, graph to the left here. So what you're seeing is four week average dwell, in LA for inland IPI, hubs such as Salt Lake City, Columbus, Dallas, Chicago, Kansas City. And what this graph is comparing is the last year's rail dwell at this time for the same four week period versus current rail dwell for the last four weeks. And as you can see, almost every single IPI location is seeing an increase in rail dwell at this time. This shouldn't really be a surprise to us because if you compare the amount of volume and demand coming through LA last year this time versus this year, it is very different. Right? We're seeing kind of this elongated peak season into The US market right now, so it makes sense that there is more congestion at this time. The good news is the congestion has actually gone better across the last few weeks. A few weeks back, even a month or two back, we were seeing some carriers even limit, some IPI bookings. Now the good news is carriers have pretty much reopened all IPI bookings. However, average rail dwell today as it stands in the last four weeks is about nine days across these five hubs just to give you an idea. And around this time last year, the average for these five IPIs was actually about five days. So slight increase there.

The other thing I do wanna call out here, for those of you who are shipping 20 foot containers, there is an interesting element to note when it comes to rail. 20 foot containers need a matching of another 20 foot container in order to depart on the rail. It has to do with the fact about how the rail wells are built. So 40 foot containers obviously fill a full rail well. However, two twenties are needed to be matched to move. So because of that, if a 20 foot container can't find a match, it ends up being further delayed, which is something that can result, obviously, in additional transit time for those IPI moves. In addition, heavy 20 twenties wait for a lighter partner to match with, which obviously can also cause that domino effect of delays. So, therefore, because of that, we tend to see that forty and forty high cube containers tend to get priority due due to the fact that more matches are available and coming in. So do keep that in mind if you are shipping twenties, because that is obviously something that can impact overall transit time for these IPI moves. Okay.

Alright. Next slide. As I mentioned, I did wanna cover a little bit a bit more about the Panama Canal as we've seen some changes to the draft limits. So let's first start with the graph just so you know what you're looking at here. So here you can see what the draft limits are currently versus what they might have been before. At the very bottom there, that... Where it says Panamax old locks, 39.5 feet. So there are two types of vessels that can route through the Panama Canal. There's obviously the original Panamax vessels and there's the Neo Panamax. So as far as the smaller Panamax vessels go, the draft limit remains remains unchanged. There was no change there. It is still at 39.5 feet. However, when you look at Neo Panamax vessels, we've actually seen a positive change in the draft levels. The last few months, we've seen the draft limited at about 47.5 to 48 feet. Now as of recently, they've increased the draft limits by almost one to 1.5 feet. I know that might seem small to us, but it actually makes a very big difference as it allows heavier vessels loaded with more cargo to actually pass through in addition to more vessels being allowed to pass through each day. So moving over to the right, as you can see, we're at 49 feet now for Neo Panamax, 39.5 for Panamax smaller vessels.

So what this means for you, as mentioned, now, heavier cargo can actually load, meaning vessels that are filled with more containers are now able to run through the Panama Canal. In addition to that, this also means shorter waits because there are more daily slots available for carriers to utilize. The reason why we've seen these draft changes is because there has been some rainfall, and there's been some better management of the Gatun Lake that has essentially drove the recovery of this. So hopefully, at some point, we can get back to that 50 feet, which is the maximum, but we are slowly making progress there. So this is great news for the Trans Pacific eastbound market, which Kyle will cover in a bit because it does mean that hopefully we see a little bit less of this capacity absorption, that will then allow rate levels to hopefully normalize a bit. Okay.

Alright. And then last slide for me. I did wanna talk a little bit about the Suez. So it's quite interesting right now because we're actually starting to see carriers make an impactful return to the Suez Canal. So what this means, just to give everyone a quick summary, almost three years ago now, the Suez was essentially closed for the most part, and majority of carriers that used to previously route services, through the Suez had started routing around the Cape Of Good Hope instead. This primarily impacted the Far East westbound trade, and obviously has impact as well to Gulf And East Coast, Transpacific eastbound trades as well. Over time, with all the recent escalations of the conflict, carriers have been hesitant about rerouting back through the Suez. But for the first time in almost three years, we're starting to see kind of like a more structural rerouting of the Suez.

So let's talk about the graph here on the left before we go into the details. So what you're seeing here is a tonnage of containers that are now routing through the SUEZ back in 2025 versus 2026, for the January through August period. So back in 2025 in that period, we saw roughly about 46,700,000 TEUs route through the Suez. In 2026, in that exact same time frame, we're now seeing a 54% increase from 2025, resulting in 72,100,000 TEU. So as I mentioned, that is a significant increase. Right? So that's good to hear. However, if you compare the current 2026 year to date, TEU that is routed through the SUEZ to 2023 prior to the closure of the SUEZ, we are still very far behind compared to that number. In 2023, we saw essentially four x of the 2026 number we're seeing. So 72,100,000 times four, that is essentially the amount, of cargo that was actually routing back in 2023. So there's still a long way to go for us to get back to full return to the SUEZ, but the first signs are there, which is very positive. Routing through the Suez reduces transit time tremendously for Far East westbound cargo and US East Coast and Gulf cargo on Transpacific eastbound.

On the right here, I have a quick summary of a few of the trades where we're seeing this significant return from carriers. On Far East Westbound, Med, we are probably seeing the biggest return right now. Essentially, 13 ships now route through the Suez for both front haul and back haul, which as I mentioned, saves some transit time for that trade lane. Far east westbound North Europe, so this is obviously Asia to the likes of Rotterdam, The UK ports, as well as German ports. We're seeing five of seven Ocean Alliance loops use the Suez just on eastbound only legs, whereas westbound is still routing through the Cape. We're also seeing a return of the Suez on the ISC to North America trade lane as well. The c... CMA, c g... CGM, Indomax service is now also routing through this US starting mid October. And what's interesting is the top five carriers in these trades overall, MSC, CMA, MERS, CAPAC, and Costco have pretty much all made Suez Transits on some of their strengths at this point. The only carriers that haven't are really Evergreen and Premier Alliance. They're still using the Cape. That doesn't mean this can't change. I think over time, we will see more carriers start to take these routings. And then some of you might have questions. What about TPEB? As of now, carriers have not explicitly stated on any TPEB service that routes to the East Coast or Gulf, whether they'll be routing through the Suez. But I imagine with these other trade lanes starting to take these moves, we could eventually see that change for TPAV over time. Okay. Alright. I think, that's it from my end. I will pass it over to Kyle for the TPAV update.

Kyle Beaulieu

Okay. Thank you, Darsh. So on the TPEB side, we have one of our big pauses, for the year. So Golden Week, just happened. So, today, what we're gonna do is just look at a little bit of supply side, what was the impact there of Golden Week, and then talk a little bit more about some of the disruptions that we saw recently. So on the TPV supply side, there's good news for everyone who has to ship out there. So usually this time of year, with Golden Week and post Golden Week, demand low, we see a big drop in capacity. But this year, it's lower than normal. Now I say lower than normal, but what really, is normal these days? So at least it's lower than the last couple years. So, blanks did increase as expected for golden week, and so 21% of blanks, blanked in week 41, which is this week. But still, capacity total was 80 to 90,000 t's more than the prior two years during this period. So that is in large part due to higher demand, this year, as well as the disruption that we've seen in the market.

So in both 2024 and 2025, demand did wane off before the end of September, so we didn't have, what is kinda considered the traditional push before golden week in either of those years, and so that's in part reflected in the capacity to blow it here as well. So PSW and US East Coast, they were hit with a higher number of blanks, over this golden week period, while PNW and golf remained relatively consistent. The PNW and golf do have less services than others and have had more consistent space constraints over the last few months. So for those of you who shipped to the PNW and golf, that was that was good, for you over this period and and should help get a more consistent flow. Post Golden Week, so we go into October. There's going to be a relatively quick return in normal capacity. You can see things going straight up there. And so total volume deployed should return to the normal levels that we see, by the second half of October. So, given the amount of demand that we've had and what the carriers expect to happen in the market in q four, that return to to... Of the capacity, should be should be healthy for us.

Now, for this next slide, just wanted to talk a little bit more about some of the disruptions that we talked about in August and September, and sort of put to color what what that means, and how that could've could've led into what your experience was over Golden Week. So, the messy graph here, on the top left shows just how disruptive and unpredictable omits have been for the few major ports in China, while the bottom chart shows average omits across, the region. So, the averages tell the story of the increases over four week periods, going back to to earlier this year, but the average is sort of sugarcoat what the disruption has been like. So if you look at Shanghai, which is the top line here, the most vile tile, it has upwards of 10 blanks in a week, down to four, back up to eight. So that's a lot of unpredictability week over week, and that's, in large part due to the typhoons, and the congestion that had built up there. So that has made it difficult for you to plan, for shippers to plan, and carriers as well.

And the thing with omits, it's not like that capacity is made up the following week. So a shipper loses that vessel as an option. That capacity is gone, and it's not made up by that string at least. So that does make it tough, if you rely on a single carrier or service string. The caveat to that is that some of these omits, they are offsetting loading at other locations. So take Shanghai and Ningbo. They are relatively close together, and they often actually are called by the same vessel or services. So sometimes what's happening here is that carrier will omit Shanghai for one service and omit Ningbo for another service, and then they'll attempt to load more than normal out of the respective port of call. So that is a good creative solution to help keep cargo moving and vessels moving, but it doesn't totally just offset the disruption, as it is still... As it's less services for that port and less flexibility in the market.

Now a quick quick note on the on the SUEZ that that Tashimi talked to. So she mentioned return to SUEZ. It's not having a... An impact on TPEB trade, quite yet in terms of services. So it is starting on ISC, as Darshini spoke to, which depending on your point of view, ISC is or is not part of TPEB. For that comment, I'll consider it separate. So the Cape Of Good Hope does represent 20 to 25% of US East Coast capacity weekly at this point. So if and when those services do return to the market, it will have, a sizable impact, on transit time and overall capacity. The service... Or these adjustments by carriers to other services or other trades, I should say, there are date downstream impacts of those, and so that will open up carrier capacity globally, because some of those shorter routings will need less vessels and, and that... And those vessels could potentially trickle to TPEB, maybe free up a few vessels for us to fill in some of our gaps. But, for the... At least for the moment, to achieve that, it will require some consistency view. So as... And we're very early, in sort of the return there.

And then just a little bit of color to why PREPAR is westbound. So carriers are prioritizing Europe and the ISC Middle East services first, because there is the most to gain from a transit point capacity standpoint. And so as Darshini mentioned, the largest change has been so far to, far east westbound to the Med. And you think about that geographically, look... Go look at map or globe, it's a lot quicker to get to the the Med, going via the SUEZ and going all around the Cape Of Good Hope. And so, that gain, is much larger on the med, and that's why they're starting there first. So as, as things normalize across those trades, then we'll start seeing, sort of... We'll start seeing some more of that come to TPEB. But at least in the short term, you should expect them to continue to prioritize those trades over TPEB, before they make that change here. So that'll be it for TPEB, this this week, and I'll turn it over to David to talk about the air market.

David Grinevald

Thank you very much, Kyle. Alright. So let's try to walk quite quickly through the air market so that we can keep a little bit of time for the q and a at the end of the webinar. Similar to ocean, we have also experienced our traditional low for golden week. So if you look at the global air cargo tonnage, it fell 4% week over week, as we were heading into golden week. Obviously, this was led by the Asia Pac origins where the tonnage fell by about 7%, but, really, every origin went down except for Africa. That being said, if we look at the longer trend, we see that the tonnage still held about 5% higher year over year. So what this is telling us in essence is that there is no shortage of demand for, goods flying. If we look at capacity, however, it is remaining pretty much stable for a third straight week. It's only up 3% year over year. So what it means in essence is that our demand is growing much more quickly than our supply, which quite logically means that the the rates are going up. The global rates rose 2% week over week, and they are still 27% higher this year than they were last year.

I will go very quickly on this slide. For those of you who follow the FMU Live months over month, you know that this is something we've been looking at ever since the beginning of the conflict in The Middle East. The EASA has yet again extended its conflict zone guidance, which is now going all the way through to November 16. In essence, they're claiming that there is still... Or or stating rather than claiming, stating that there is still a major risk to civil aviation in the area. And the airports of Abu Dhabi, Riyadh, Muscat, most particularly, impacted with every flight needing individual clearance, to to go over there.

I will now move to the jet fuel, which is obviously a very big part of the story. It has been since the beginning of the conflict. We had some relief in the spring, and the summer. Unfortunately, now going into October, the jet fuel prices have risen to roughly $180 per barrel, up from, what we saw the the high one 50 in early September, which is in essence reversing most of the second and third quarter partial recovery. Iran has carried out nine tanker attacks in the Strait Of removed this so far. And so what we're seeing is about about 5,000,000 barrels a day of Middle East crude production that are shutting through. When it comes to the way that, airlines and carriers are are, reacting to this situation, they're now passing those costs through. The fuel surcharge levels are now tracking the spot jet fuel climb almost in real time. A situation that is slightly or should I say even very different from what we've seen during the summer month. If you look at the graph here, you'll see that, the price of jet fuel pretty much started going back up when the ceasefire broke down in July. And during July and in August, we saw that the fuel surcharge were not tracking, the price of jet fuel. There can be a variety of reasons for that. One, the summer months are are usually considered to be the slack season in air freight, and carriers might have not been willing to add additional price pressure during the slack season. And there might have been also a sentiment in the market that the ceasefire had broken but would be reestablished, shortly, which we now understand is not the case, and and we are now entering the fourth month, after the ceasefire, and it has not been reestablished. So, what you see on the on the table here is, some of our core carriers' fuel surcharge. And whenever you see them in red, it means that they have increased. And as you can see, nearly all of them have been increasing their fuel surcharge. Alright.

This is, a very interesting slide, but a little bit of a a deeper trend in the market. I'll go very quickly. Some of you, again, who are regular of those FMU lives have heard us have heard us talk about this ecommerce versus, AI and cloud computing. It's very much the tale of of two continents here, because what we're seeing happening in Europe is very different from what we're seeing happening in The US on both fronts. Ecommerce to Europe has gone down tremendously. It is it is now, about minus 40%. July alone was minus 24% of ecommerce from China to Europe. However, to The US, we're seeing it pick back up. Ecommerce to The US was 17% higher year over year, which means that the market is sort of, recovering from the establishment of, or rather the removal of the de minimis in in 2025. And kind of the same story on cloud computing. I mean, cloud computing is now the market's real growth engine. It's pretty much doubled, from Asia to The US. Semiconductors are plus 50%, so clearly the new growth engine. A lot more is going to The US than to Europe, which also explains why we're seeing a widening gap, in the air freight rates from Asia to The US versus from Asia to Europe. Obviously, we... Some origins are are more... Or are heavier, in this AI boom, Taiwan, Vietnam, and Thailand. And, therefore, we anticipate that next year, the main risk when it comes to access to capacity will be concentrated on those markets. Okay.

And now our traditional regional deep dive. I will not go through all origin, but I will underline the contrast maybe between North and South China. North China has been pretty soft on the TPEB, coinciding with the golden week law. Now airlines anticipate that and had obviously, cut capacity in advance. South China, a little bit of a different situation. We see that the rates, are holding up and the space is full through October 10. Taiwan, Vietnam, and Thailand, being, as we just mentioned, the main, AI component origins are still holding very strongly. In Thailand, one of the most important thing to mention is that, unfortunately, Thailand has experienced massive floods, in the last couple of days, and therefore, we're seeing a very important backlog at the airline terminals, over there. Maybe one more thing to mention is India, where we have talked in the previous week about ocean to air conversions driving the rates up. It does seem like there is a little bit of a relaxing situation on the ocean front. However, what we're seeing now on the air side is that we're having a massive congestion at the airport, most specifically in Mumbai on an alleged manpower shortage. So a lot of waiting time, and we are advising our customers to book ahead in order to get access to this capacity. I will wrap it up here and invite back Darshini and Kai so that we can start answering some of your questions.

Dharshini Shegran

Okay. Great. Let me kick it off because I have a few questions that were directed towards SUEZ and rail. So the first question is, what does the volume through SUEZ look like by month? That is a great question. So if you're just comparing overall SUEZ transits, for let's just use, Asia to Europe, It's actually about 25%, of SUEZ transits are happening versus 75% going via Cape Of Good Hope. And then it's September that actually increased to 27%, so about a 2% increase. So I think as mentioned earlier, we can just kind of assume that more carriers are gonna be routing more strings and eventually more trades back through the Suez. But I think 25 to 27% is the number for that right now. Okay. Great. And then there were also a few questions on rail just for time's sake. I'll kind of paraphrase here. Someone had asked about general delays on rail shipments outside of Long Beach. Just because demand is so high right now and we're seeing an influx of capacity come through The US in this elongated peak season, there is certainly dwell in other rail ports, but I wouldn't say that they were as significant as the LA Long Beach dwell. All other rail ports are seeing marginal congestion, but nothing that is severely delaying cargo. I think in the last month, we mostly saw LA and Long Beach really being the bottleneck, which, as I mentioned, has since then, improved. And someone had also asked, the reason for the rail dwell increase. It really just has to do with the amount of containers that are moving through The US right now. So, obviously, with that influx, that generally tends to cause a bit of constraint on these rail ports, hence hence why we're seeing it. But anyway, as mentioned, it is improving. Okay, Kyle. I will pass it over to you for the few questions you have.

Kyle Beaulieu

Yeah. I'll take a a few questions, about rates, and I'll I'll be brief here, just because we're a little over time, but we have a few questions in there. Maybe I'll start with the first one and sort of use that to to to talk to some of the others. So the first question is what do you expect TPD to Gulf Coast rates to look like through the end of the year? So I can't say what the average rates will will necessarily be, but, the Gulf Coast should remain the tight... One of the tightest in the market. And that... So that would remain... Mean that capacity there, would be tight. It is one of the, gateways that is is most constraints constrained traditionally. They also... There's also a lot of large projects, going on that region, some of the, AI builds, that sort of thing, that is required more demand, to that region too. So, would expect, at least capacity and space to The Gulf, to remain tight, and as as a result, that will impact rates there.

And then just sort of a few questions on, like, outlook through end of the year. So, traditionally, post golden week, there's a little bit of a lull, in the market. So that might go into sort of October, into November, before you you start to get the increase, in demand before, Chinese New Year. So we do have a little bit earlier of a Chinese New Year this year, so you'd expect that to start picking up a little bit earlier this year. But also, at least from a demand standpoint, there's not expected to be a huge slowdown yet. So, for October, November, space is, expected to be still constrained, and with that rates, will will remain elevated. So does that mean that there won't be a little bit of softening? Not necessarily. But, I wouldn't expect rates to sort of drop down to, rate levels that we saw earlier this year sort of pre... Both pre the peak, but also pre, the conflict, in Iran. So, we do expect overall rates to remain elevated through q four, though, traditionally, there is a little bit of a lull in the market. David, onto you. We got a... We have an air question here, before we wrap up.

David Grinevald

Yes. Absolutely. The question, very interesting one, is what information can you share, if any, about the ion battery transportation? We heard that the SOC is changing from 30% or less for air freight to everything related to transport regardless if ground or sea transport. Thanks for raising that. I think it's a great question because there's been a lot of chatter around state of charge limits lately, and it's easy to see how the lines get blurred. The short answer is no. The 30% state of charge rule is not being expanded to every mode of transport across ground and sea. First, IATA only regulates air freight. They don't set the rules for ocean shipping. So while air freight regulations are tightening up, specifically making the 30% state of charge mandatory for batteries packed with equipment. For those of you who ship DG goods by air, you will know the UN thirty four eighty one, which is now in addition to the stand alone batteries, which is the UN thirty four eighty. Those strict SOC limits remain an air specific safeguard, designed to mitigate thermal runway risk in aircraft cargo holds. For ground and ocean transport, this this state of charge cap is not a global standard requirement, even though some carriers can have stricter house rules, obviously, but there is no overarching regulation forcing a 30% limit on all surface transport. So if you're shipping via road or sea, don't assume that everything suddenly requires a 30% SOC unless your specific, vessel operator requested.

Dharshini Shegran

Okay. Unfortunately, I do think we're out of time. So that does conclude today's webinar. Thank you all for the great questions. We will email everyone a link of the recording and slides tomorrow morning. Thank you again, and have a great day.

David Grinevald

Thank you.