Freight Market Update: July 20, 2021
Ocean and air freight rates and trends; customs and trade industry news plus Covid-19 impacts for the week of July 20, 2021.
Upcoming Webinar: July 22 at 9:00 am PT, State of Trade: Sourcing from Southeast Asia
Trade frictions, pandemic dislocations, and market shifts are prompting companies to look closely at SE Asian, particularly Vietnam. We discuss the business landscape with an expert on the region and unveil new Flexport research to help you make the best choice.
Upcoming Webinar: July 28 at 9:00 am PT, Logistics Rewired: Air Strategies for Ocean Chaos
The global supply chain is intertwined: as the ocean freight market is in upheaval, how is that impacting global airfreight supply? How can consignees best take advantage of smart airfreight strategies? Join Flexport airfreight and operations leaders as they provide an expert overview of the current airfreight market as well as how to implement a smart airfreight strategy in today’s volatile market.
Ocean Freight Market Update
Asia → North America (TPEB)
- Intermodal routings severely strained due to heavy congestion at both coastal ports and inland hubs. Union Pacific rail service suspension in Chicago, an effort to clear the extreme backlog at the ramp, expected to last a week+. Chassis shortages, congestion, over-reliance on key gateways and IPIs, and Covid-19 related disruptions to labor, are expected to persist as we head into peak.
- Rates July 15 GRI implemented, August 1 GRI expected
- Space Critical
- Capacity/Equipment Critical/Severe under capacity
- Recommendation Continue to book well in advance (at least 4-6 weeks) prior to CRD for best chance of hitting it. Encourage suppliers to support departures from different origin ports. Consider terminating cargo at destination coastal ports to prevent intermodal delays.
Asia → Europe (FEWB)
- Space and equipment crunch continues. Market demand exceeds supply as rates skyrocket. Situation is worsened by blank sailings and poor equipment availability. Carriers are overcommitted and are limiting booking acceptance or rolling shipments. Schedule reliability is low.
- Rates Increased on July 15th. Rates are expected to move up further on August 1st
- Space Extremely critical space situation
- Capacity/Equipment Severe equipment shortage across all Asia origins.
- Recommendation Book at least 4-5 weeks prior CRD. Consider the limited premium options. Adopt flexibility on equipment.
Europe → North America (TAWB)
- Capacity remains severely constrained. Strong volume forecasts and cargo backlog keep upward pressure on rate levels.
- Rates July 1 GRI implemented.
- Space Critical
- Capacity/Equipment Tight and guaranteed only with Premium rates. Several vessels are omitting Rotterdam due to the ongoing port congestion there. Be flexible re. departures from different origin ports. New blank sailings will reduce capacity to USWC in week 31.
- Recommendation Book 5 or more weeks out
India → North America
- Export demand continues to surge along with ocean freight rates as carrier capacity remains constant.
- Rates 2H July rates increased. Expect rates to continue climbing through August.
- Space is critical to USWC from all ports of loading in the ISC region. Southern India to USEC also a challenge due to capacity on both feeder and mother vessels.
- Capacity/Equipment equipment issues back in headlines out of the region. Carriers are reporting critical levels in Southern India.
- Recommendation Use premiums on urgent shipments and shipments with CRD approaching. Book out as far as possible to increase the chance of a timely shipping order (SO) release from the ocean carriers.
North America → Asia
- Vessel delays and void sailings continue to diminish West Coast capacity. The US West Coast continues to see delays in LA and both Oakland and Seattle experiencing schedule delays and bunched up sailings on a more significant scale in recent weeks.
- Rates One carrier has announced GRI intentions for August for all dry exports to Asia.
- Space Tight from the US West Coast. The US East Coast is showing signs of improvement in available space. The US Gulf space has increased with capacity more readily available.
- Capacity/Equipment Capacity tightest from the US West Coast. Equipment and chassis are tight at most ports and all ramps.
- Recommendation Book 4+ weeks out.
North America → Europe
- US to Europe capacity in-transition There are still some delays in the ocean network however a major alliance is in the process of a major redesign in their vessel network and creating gaps in coverage as vessels are reassigned.
- Rates Steady.
- Space Very tight from the US West Coast. The US East Coast is being managed more tightly by a few ocean carriers but with proper lead time procuring capacity is more manageable.
- Capacity/Equipment Containers at US EC ports are available but certain rail ramps are tight. Chassis very tight at both ports and rail ramps.
- Recommendation Recommend 4+ weeks lead time on bookings from the US East Coast and 5 to 6+ weeks for the US West Coast.
Air Freight Market Update
- Stable demand continues ex EU. All hubs are seeing healthy cargo levels, and still some larger projects in the market stemming from the Northern Europe ocean port congestion
- Be open to longer transit times and splitting bookings across multiple uplifts. For US destinations, we are seeing some attractive uplift options, slightly more deferred through another hub.
- Turkey is offline until next week, expect to see a slight increase in demand when their factories come back online
- FAA “preighter” exemption due to end last week has been extended. A signal to the market that while PAX capacity is returning slowly, the full air freight capacity “pre-covid” has not yet been restored.
- Into LATAM, capacity more strained than into the US. Higher proportion of freighters than PAX capacity
- Slight congestion at terminals for import at AMS. Other hubs/terminals reporting high volumes but managing without significant issues.
- Advice continues: early bookings and flexibility can offer innovative solutions for import/export into EU
- 100% screening for all airfreight cargo for U.S. exports is in effect as of July 1st, 2021! Ground Handlers report longer lines for cargo throughput for export, as screening takes more time than anticipated.
- Export demand remains very steady while no meaningful capacity is added. Larger consignments, from the West Coast and Midwest, may take 2-3 days from booking to uplift into key European destinations. Capacity from the West Coast and Midwest Gateways is most constrained to Central European gateways such as AMS/CDG/FRA, while East Coast capacity remains balanced and very manageable.
- Space to India, Nepal, Bangladesh and Indonesia remains very constrained as aid and relief efforts reach the COVID-struck region—currently space is booked out until the end of July, but ad-hoc capacity is opening up.
- LAX and ORD ground handlers still face large backlogs and are using off-airport facilities to manage the flood of cargo. Ground handlers report 2-5 days of backlog to break down import freight. Export cargo can’t be tendered earlier than 2 days before actual departure of flight
- Trucking remains scarce for airport transfers and local pickup and deliveries, especially in LAX/ORD/JFK.
Updates from Flexport's Customs & Compliance Team
Currency Agreement Reached Between US and Vietnam
On July 19, the US Department of the Treasury and the State Bank of Vietnam reached an agreement on Vietnam’s currency policies, fending off US threats to impose Section 301 tariffs on Vietnamese products for this issue. However, the US Trade Representative did not comment on the status of its investigation into Vietnamese timber, which could lead to Section 301 tariffs.
CIT Dismisses Challenge to CBP Redelivery Notice
The Court of International Trade (CIT) dismissed a legal challenge to CBP enforcing an FDA inadmissibility decision. The CIT said it did not have jurisdiction as the importer was ultimately challenging the FDA’s decision and that the importer filed its challenge beyond statutory deadlines.
President Has Greater Section 232 Tariff Powers
The US Court of Appeals for the Federal Circuit (CAFC) ruled that the President can modify Section 232 tariffs beyond the statutory deadlines enshrined in law, provided the modification relates to the underlying reasoning for the tariffs. CAFC overturned a prior decision from the CIT.
Factory Output News
S. Korea Analysis: COVID-19 resurgence may put brakes on South Korea's crude import uptrend [Source]
Taiwan Tropical storm In-Fa could pass directly over Taiwan this week [source]
Vietnam Vietnam to impose 5% export tax steel billets and reduce import tax on select steel products [Source]
Vietnam Domestic car manufacturer Vinfast to launch EVs in NA and Europe early next year [Source]
Indonesia Indonesia surpasses India as Asian Covid epicentre, reporting numbers of over 50, 000 daily new cases [Source]
Thailand The expansion of COVID-19 restrictions are announced on Sunday, Jul 18, including mall closures, travel curbs and a night-time curfew. [Source]
UK Driver shortage is causing delays and extra costs for business [Source]
Freight Market News
FMC Prepares to Audit Carriers A newly formed Vessel-Operating Common Carrier Audit program, under the Federal Maritime Commission, will audit detention and demurrage fees levied by nine container lines. The Journal of Commerce reports shippers spent months filing formal complaints about hundreds of thousands of dollars in fees. Their argument is that the fees are unfair since congestion prevents them from picking up imports and returning containers in a timely fashion.
Container Ships Try Speeding Up American Shipper reports the global average speed of container ships has risen to 14.9 knots for July, a 6% YOY increase. On the way back to Asia, they can move as fast as 20 knots or higher. The speed is a result of high demand for containers, although ships still have to wait for berth space when they arrive at a port.
NY/NJ Becomes US’ Second Largest Port The port of NY/NJ recorded a 47.8% YOY increase in throughput for June, making it the second largest port in the United States. The Loadstar reports the shift in volume to the East Coast port is a result of shipper attempts to avoid ongoing West Coast congestion. The change puts Long Beach as the third busiest port; Los Angeles is still busiest.
Economic highlights from Flexport Chief Economist Dr. Phil Levy
US retail sales up 0.6% in June after a dip in May. They remained below their April peak, but up 18.0% over June 2020. Comparing 2021 Q2 to Q1, among the biggest category gains were clothing (up 13.8%) and autos (up 10.0%). The biggest decline was building material and garden (-0.4%).
US manufacturing slows slightly in June, down 0.1%. That figure was heavily driven by autos, which were down 6.6%. Excluding autos, factory output was up 0.4%.
China trade strength in June. In dollar terms, Chinese exports were up 32.2% over a year earlier, while imports were up 36.7%. While both numbers were affected by the slowdown in 2020 and the RMB appreciated significantly over that period, the trade figures significantly exceeded analyst expectations.
Chinese Q2 GDP rises over a year ago, up 7.9%, just short of expectations.
Plans for carbon border taxes were unveiled by both the European Union and some members of the US Congress. In each case, a tariff would be applied to imports if the originating country were deemed not to have used appropriate environmental policies.
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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.