Market Update

Freight Market Update: April 6, 2021

Ocean and air freight rates and trends; customs and trade industry news plus COVID-19 impacts for the week of September 9, 2020.

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Ocean Freight Market Update


Asia → North America (Transpacific Eastbound)

  • Rates: No change.
  • GRI Mar 15: None.
  • GRI Apr 1: Slight increases.
  • Capacity: Recommended advance booking notice at least 21 days prior to CRD.
  • Notes: Implications of the Suez Canal situation will be felt in the coming weeks on both the USEC and USWC, with the USEC being hit the hardest in terms of carrier actions. Capacity to the USEC, primarily out of Southeast, is projected to be extremely tight through April.

Asia → Europe (Far East Westbound)

  • Rates: Rate increase expected due to Suez Canal situation
  • GRI Apr 1: Some rate increases and some rate extensions
  • Capacity: Recommend advance booking notice at least 21 days prior to CRD.
  • Ripple effect from Suez Canal blockage will become very visible in the next few weeks with quite a number of blank sailings from Ocean Alliance and The Alliance. There will be a severe equipment shortage as a result of fewer containers returning to Asia. Overall, space and equipment will be very challenging in the coming month.

Europe → North America (Transatlantic Westbound)

  • Rates: Increasing
  • GRI April 1 / 15: Implemented
  • GRI May 1: Likely implemented
  • Capacity: Recommend advanced booking notice at least 5 weeks prior to CRD.
  • Notes: We recommend booking urgent cargo on Premium. Market expected to remain dynamic through Q2 as capacity stays heavily constrained.
  • Supply is extremely tight across Europe as port congestion and lower vessel capacity prevent empty-container repositioning. The bottleneck effects exacerbated by the Suez canal blockage will reverberate in the mid-term.
  • Expect limited cargo delivery and booking windows to remain in place to alleviate terminal congestion at origin.
  • Carriers are implementing temporary booking stops to reduce backlog.
  • Capacity development: Only 1 blank sailing announced in May so far (AL1 service, week 19), expect more void sailings and change of Port rotation announced with short notice in coming weeks.

India → North America

  • Rates: Increased
  • GRI April 1: Increase across multiple carriers mainly to USEC due to delays with Suez Canal.
  • Capacity: Space is extremely tight due to overbooked vessels, low vessel transit time reliability, and congestion at many major terminals. Transhipment delays continue to persist due to congestion and high volumes on TPEB trade. Post-Suez vessel bunching expected at key India ports, causing more downstream delays. Suggested booking 15-20 days prior to CRD.
  • Equipment: Inventory shortages at Mundra, New Delhi, and Bangalore in particular. Government intervention had brought relief but new interruptions to vessel schedules will delay empty repositioning.
  • Notes: We continue to recommend booking urgent cargo on a Premium no-roll service. Recent news that Maharashtra (2nd most populous state in India and home of key port Nhava Sheva) has gone into lockdown following 104k new Covid-19 cases on 4/4.

North America → Asia

  • Rates: Increasing
  • GRI April 15: Three carriers intend to implement a GRI for all Asia destinations at mid-month.
  • GRI May 1: An additional 3 carriers intend to implement a GRI for all Asia destinations.
  • Capacity: Re__commend advanced booking notice __10-14 days prior to CRD at Port.
  • Capacity: Recommend advanced booking notice 10-14 days prior to CRD at Rail Ramp.
  • Chassis availability is tight at most major ports and rail ramps. Recommend factoring in more lead time for truckers to procure chassis.
  • Severe vessel congestion at both US coasts continues to move vessel cut-off dates and earliest return dates in the network. The backlog of incoming vessels exiting the Suez Canal may make matters worse in the coming weeks off the US East Coast.

North America → Europe

  • Rates: Steady
  • Port congestion along the US East Coast and in North Europe impacts vessel-schedule integrity for all services, causing capacity to be lost week to week as ships make up time. We urge booking sooner to help ensure coverage.
  • Capacity: Recommend advanced booking notice 10–14 days prior to CRD at port.
  • Capacity: Recommend advanced booking notice 10–14 days prior to CRD at rail ramp.
  • Chassis availability is tight at most major ports and rail ramps. Anticipate more lead time for truckers to procure chassis.

Air Freight Market Update


Asia

  • Asian export markets continue to show significant strength in early April with all major origins reporting very strong demand and cargo backlogs. Yields are at highs for 2021 as factories are in full swing and purchase orders keep flowing in at a very rapid pace.
  • Expectations are for the market to stay at these levels for the next two weeks and then cool a little as we head into late April/early May. Origins where demand is very strong, like TPE, BKK, SGN, HAN and ICN, will not experience much reduction.
  • The recent Suez Canal impasse increases the chance that Ocean to Air conversions accelerate, putting additional constraints on the already very busy FEWB trade with additional upward pressure on yields.

Europe

  • Even after the Easter holidays, european export demand continues to show a lot of strength to the Americas and Asia in general, though space to the U.S. West Coast is the most constrained. ORD, JFK and ATL had a slight influx of new capacity from PAX and freighter carriers, which provided some relief. Load Factors in 90% range are reported back across carriers flying on the TAWB and FEEB trade.

Americas

  • Export capacity remains tight due to continued lack of belly capacity. It still takes several from bookings to uplift into European key destinations. Capacity from the West Coast to Asia is seeing increased demand from the perishable sector.
  • Many US carriers have delayed the start of transatlantic passenger services as many European countries reimpose lockdowns and close borders to tourists following a surge in Covid cases. It’s unclear how long these delays will persist,
  • ORD and LAX continue to see large backlogs in the breakdown of import freight as ground handlers are overwhelmed by large numbers of freighter flights from both Asia and Europe.

Updates from Flexport's Customs & Compliance Team

GSP/TPA/MTB Renewal

The House Ways and Means ranking member, Kevin Brady (R-TX), is pushing Congress to move fast on renewing the Generalized System of Preferences (GSP), Trade Promotion Authority (TPA), and the Miscellaneous Tariff Bill (MTB). Although already expired, GSP and MTB have wide-reaching implications for importers, as they impact whether products enter the US customs territory duty-free or at a reduced tariff rate. TPA is expiring over the summer. While it has more macro effects on trade, with a UK and Kenya free-trade agreement in the pipeline, TPA could lead to more opportunities for importers to take advantage of preferential tariff treatment. However, it is unlikely that Congress will renew GSP, TPA, or MTB in the near-future.

USTR Meets With Vietnam’s Minister of Industry and Trade

On April 1, US Trade Representative (USTR) Katherine Tai met with Minister of Industry and Trade Tran Tuan Anh of Vietnam. In a readout following their virtual meeting, Ambassador Tai mentioned discussing an ongoing Section 301 investigation into Vietnam’s currency practices. The USTR directly addressing concerns about Vietnam’s currency highlights the seriousness with which the office of the USTR is treating the Section 301 investigation, an investigation started in the Trump administration. Importers should continue to monitor developments on this topic, as the Biden administration does not seem likely to close the investigation.

USTR Suspends Trade Engagement With Myanmar

On March 29, the USTR announced it is suspending all trade engagement with Myanmar under the 2013 Trade and Investment Framework Agreement (TIFA). The suspension will remain in effect until a democratically elected government returns to power. The USTR further implies that Myanmar may no longer be a GSP beneficiary when Congress next considers GSP reauthorization. The USTR’s actions have medium-term implications for importers who source goods from Myanmar, but also show the USTR’s to deploy a wide range of policies to effect desired changes. The trade community should continue to follow the USTR’s actions here.


Economic highlights from Flexport Chief Economist Dr. Phil Levy

  • An IMF crisis warning emerges as The International Monetary Fund points to a potential debt crisis in emerging markets. The concern was that, as large economies like those of the US and China, recover more quickly from the pandemic economic shock, interest rates will rise and draw capital away from developing countries, which are recovering more slowly.
  • A survey shows China growth as the official composite purchasing manager index (PMI) for March rose to 55.3 from 51.6 in February. Numbers over 50 indicate expansion. The sub-index for new export orders rose to 51.2 from 48.8 in February.
    • Other indicators of Asian economic strength included South Korean exports up 16.6% in March from a year earlier, and an index of Japanese manufacturing sentiment turning positive for the first time since September 2019.
  • Woeful UK GDP numbers show that in 2020, UK GDP dropped by a revised 9.8%, the largest drop in the OECD, save Argentina and Spain. On a more optimistic note, the Bank of England forecasts 5% GDP growth in 2021.
  • France lowers its forecast for 2021 growth from 6% to 5%, as it enters a new four-week lockdown. French GDP contracted 8.1% last year.

Freight Market News


Ever Given’s Owner Declares General Average Shoei Kisen Kaisha, the owner of the Ever Given, has declared General Average with regards to the grounding of the cargo ship that blocked the Suez Canal for six days. General Average will require consignees meet a bond requirement before containers are released from the ship. Charges are usually a percentage of the value of the cargo, but The Maritime Executive reports no cargo was damaged during the grounding, so bonds may help recover the cost of refloating the ship.

Biden Names New FMC Chairman President Joe Biden has named Daniel Maffei as chairman of the Federal Maritime Commission. American Shipper reports the former commissioner has been active in urging container lines to investigate US agriculture-exporter complaints of skipped services.


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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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