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Flexport

Market Update

Freight Market Update: November 8, 2022

Ocean and air freight rates and trends; customs and trade industry news plus Covid-19 impacts for the week of November 8, 2022.

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Upcoming webinars:

North America Freight Market Update Live | Thurs, November 17 @ 8:30 am PT / 11:30 am ET

Ocean Freight Market Update

Asia → North America (TPEB)

  • Carriers are testing out the waters for Transpacific Eastbound (TPEB) PSS/GRI:
    • U.S.: TPEB ocean rates appear to be approaching their floor with recent November and December peak season surcharge (PSS) and general rate increase (GRI) announcements from the carriers. Although carrier reliability is up YoY, port and rail congestion is still seen at the major US gateways. Most notable at Houston for vessel dwell (16 days) and Los Angeles/Long Beach as rail dwell (15 days).
    • Canada: Market and rate conditions are similar to the U.S. Vancouver sees an improvement in the vessel count but berthing delays (29 days) still remain. However, yard capacity is still between 85%-100%.
  • Rates: Remain soft on most origin-destination combinations.
  • Space: Open.
  • Capacity/Equipment: Open, except in a few pockets.
  • Recommendation: Book at least 2 weeks prior to cargo ready date (CRD) and keep in mind upcoming blank sailings.

Asia → Europe (FEWB)

  • Demand has somewhat recovered but remains slow. Space is readily available but schedule reliability is affected. Port congestion in Europe continues to cause delays and late return of vessels to Asia.
  • Rates: Ongoing pressure on spot rates due to low demand.
  • Capacity/Equipment: Generally open space despite the impact of blank sailings and vessel delays.
  • Recommendation: Allow flexibility when planning your shipments due to anticipated congestion and delays.

Europe → North America (TAWB)

  • Demand is dropping for imports to the USA while capacity to the U.S. East Coast (USEC)continues to rise. Port congestion on the USEC ports continues to impact vessel schedules even though On-time Pickup (OTP) is improving.
  • Rates: Indexes are showing a stable situation as rates haven’t fallen further compared to a couple of weeks ago as congestion on USEC is still impacting rates.
  • Space: There are some openings to the USEC due to the additional capacity added in October and November. Space into the U.S. West Coast (USWC) is available on select loops as congestion continues to improve.
  • Capacity/Equipment: Equipment availability remains the biggest challenge for all EU origins, particularly in the Mediterranean region. Low empty stacks at inland depots, prioritize pick up from the Port of Loading.
  • Recommendation: Book 4 or more weeks prior to CRD. Request premium service for higher reliability and no-roll.

Indian Subcontinent → North America

  • Rates continue to drop following the overall TPEB rate trend. However, it is important to note that Indian Subcontinent (ISC) pricing is still holding strong and above pre-covid levels for some key ISC > North America port pairings.
  • Rates: Steadily decreasing across the market. Rate reductions are happening at a higher frequency, as well.
  • Capacity/Space: Space is available across most lanes at standard (non-premium) rates. Decreases in port congestion globally are effectively increasing capacity. Blank sailings are being seen on shared TPEB services, but overall not a large amount removed capacity to USEC.
  • Equipment: Continuing to add pressure to carriers ability to release shipments. ICDs and smaller out-ports are the most challenging for carriers to reposition.
  • Recommendation: Take advantage of declining rates.

North America Vessel Dwell Times

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Air Freight Market Update

Asia

  • N. China: Demand remains low to U.S. Midwest and USEC destinations, while Far East Westbound (FEWB) demand is keeping steady. TPEB rates have dropped slightly and rates to FEWB destinations maintain at similar levels to last week. Production out of the Zhengzhou area (CGO) is currently impacted due to a Covid outbreak and is leading to a decrease in expected volume.
  • S. China: Rates remain stable and overall demand is low. Some TPEB market charters have been canceled due to weak demand. As we move into November, we see more e-commerce and project volume in the market. For Shenzhen-Hong Kong (SZX-HKG) cross-border trucking, continue to expect two days of additional transit time.
  • Taiwan: The market remains the same as last week. Capacity is open with the exception of LAX, which is slightly congested due to aircraft maintenance for a few freighters.
  • Korea: The market continues to be slack with no sign of improvements. Korean Air and Asiana Airlines announced Fuel Surcharge (FSC) increases of about 7%, effective 11/16.
  • SE Asia: The overall export markets in Southeast Asia continue to be soft if not trending downwards. For Vietnam in particular, the Ho Chi Minh City Labor Confederation advised that textile, footwear, and electronics factories have had to reduce orders due to a lack of raw materials and export market opportunities. This has resulted in some companies cutting their labor force by anywhere from a few dozen to more than one thousand employees.

Europe

  • Demand out of Europe remains soft.
  • Capacity availability in the market is still above demand levels.
  • Possible handling strike at London Heathrow (LHR) between 18-21 November might lead to disrupted cargo operations, flight cancellations, and delays.
  • Prepare for the upcoming holiday season and build a forecast for your expected growth between now and the end of the year.

Americas

  • Export demand remains steady from all markets.
  • US airports are running at a normal pace.
  • Capacity is opening up further, especially into Europe.
  • Rates remain stable week over week.
  • There is a bit of a shortage on trucking capacity, as well as congestion at the airports, which is leading to a longer-than-normal dwell time for inbound cargo. This situation has been slowly improving and is expected to clear up in Q1.

Trucking & Intermodal

UK/Europe

  • Due to inflation/soaring costs to operate trucking/barge/rail the GRI for 2023 is expected to be around 10-15% (excluding fuel surcharge). Dropping volumes will not affect this, as this is based on cost to operate and truck carriers barely have any margins.
  • Capacity is still fragile despite declining container volumes caused by a continuous shortage of drivers and delayed delivery of newly ordered trucks.
  • Increase of trucking carriers looking into alternative fuels like Hydrotreated Vegetable Oil (HVO), electric, and hydrogen to decrease CO2 footprint.

Americas

Import/Export Market Trends

  • Congestion continues at Canadian ports and rail ramps. Yard utilization at Vancouver remains high at >90%.
  • Chassis shortages continue in Memphis and Dallas where we are seeing >29 and >10 days terminal dwells respectively—most inland markets are constrained.
  • Savannah, Houston, and Oakland are seeing increased congestion and 10+ day vessel waiting times due to volume, labor, and congestion.
  • Highway Diesel fuel prices have increased again MoM in most markets, with Canada seeing the largest increases—West Coast continuing to drop but all markets are over $1.40 YoY.
    • East Coast ($5.40/gallon), Midwest ($5.33/gallon), and Gulf coast ($4.97/gallon)
    • West Coast ($5.81/gallon), California ($6.626/gallon) and Rocky Mountain ($3.30/gallon)
    • British Columbia, Quebec and Ontario $6.33/gallon (~$8.61 CAD/gallon)

US Domestic Trucking Market Trends

  • Tender rejections have fallen to a new cycle low of 5.05% which was last seen in March 2020.
  • Trucking carriers are only rejecting 3% of contract loads outbound from Los Angeles and 4.5% of loads outbound from Chicago.
  • Spot rates fell hard in the first half of 2022, but national averages have been somewhat range-bound since mid-August.
  • Contract rates are currently at $2.70, which is down about 25 cents from its mid-June peak.
  • Load-to-Truck ratios are down ~20% QoQ, which is the key barometer for supply/demand in the marketplace.
  • Tender volumes from customers are down 40% QoQ.

Customs and Compliance News

Section 301 Comment Period Opens Next Week

On October 12, the Office of the United States Trade Representative (USTR) announced the next steps in the statutory four-year review of the Section 301 tariff actions currently in effect for certain imports from China. USTR is seeking public comments on the effectiveness of the tariffs, alternative actions, and the impacts of the tariffs on the U.S. economy. The public docket will be open for submissions from November 15, 2022, to January 17, 2023. Flexport’s Trade Advisory team can help your company prepare and submit comments on the costs and consequences of the 301 tariffs. For more information, please reach out to advisory@flexport.com.

CBP Publishes Updated C-TPAT Trade Compliance Handbook

U.S. Customs and Border Patrol (CBP) released the latest version of its Customs-Trade Partnership Against Terrorism (C-TPAT) Trade Compliance program handbook on November 1. The handbook was updated to reflect new program requirements for the inclusion of Forced Labor prevention. Current C-TPAT Trade Compliance members will be required to implement the new forced labor requirements by August 1, 2023.

US to Terminate AGOA Benefits for Burkina Faso

The Biden administration announced its intention to terminate the designation of Burkina Faso as a beneficiary sub-Saharan African country under the African Growth and Opportunity Act (AGOA). Effective January 1, 2023, imports from Burkina Faso will no longer be eligible for duty-free treatment under AGOA.

Freight Market News

US Imports Stabilize in October

Despite US import volumes plummeting in September, both year over year and as compared to August, October volume numbers stayed flat according to FreightWaves. Across the US, Savannah saw a 5.3% increase for September, with declines in New York/New Jersey.

Air Cargo Volumes and Rates Continue to Decline

As airfreight demand fell for the eighth consecutive month, spot rates also continue to fall. Supply Chain Dive notes that this decline will be further impacted by the shift towards ocean freight, as the ocean side becomes more reliable and a viable option.

Flexport Research Updates

Weekly Economic Report: Help Wanted

The October jobs numbers were tamer than some earlier months but showed a labor market that’s still tight. The reasonably smooth movements in aggregate employment numbers conceal a lot of tumult within and across specific sectors.

A quick reminder: the weekly economic report is now its own newsletter! You can sign up here to have these insights delivered directly to your inbox each week.

Air Timeliness Indicator: TPEB ~ @ 9.5 days, FEWB ↑ @ 9.9 days.

Ocean Timeliness Indicator: TPEB ↑ @ 81 days, FEWB ↓ @ 85 days.

Freight Market Update is a complimentary service from Flexport, the modern freight forwarder. If you're not already a subscriber, we invite you to subscribe here.

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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