Market Update

Freight Market Update: August 17, 2021

Ocean and air freight rates and trends; customs and trade industry news plus Covid-19 impacts for the week of August 17, 2021.

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European Freight Market Update Live August 24 at 16:00 CEST

A 30-minute update on the Asia-Europe and Transatlantic trade routes. Come with questions for Flexport’s experts to answer.

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Flexport’s Dangerous Goods team explains how to give your cargo the best shot at being accepted and loaded, during a time when even regular cargo gets rolled.


Ocean Freight Market Update


Asia → North America (TPEB)

  • Challenges continue to persist as carriers restrict and limit bookings on specific routings, especially on IPI corridors. A terminal shutdown due to a Covid outbreak in Ningbo last week underscores the disruptions that continue to affect an already constrained market.
  • Rates August 15 GRI implemented
  • Space Critical
  • Capacity/Equipment Critical/Severe Undercapacity
  • Recommendation Continue to book well in advance (at least 4 to 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 crunches continue. Market demand exceeds supply as rates skyrocket. The 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 Rates remain at a record high level and have stabilized in August. This is also reflected in the SCFI (Shanghai Container Freight Index) and may further increase due to the temporary terminal closure in Ningbo.
  • Space Extremely critical space situation
  • Capacity/Equipment Severe equipment shortage across all Asia origins.
  • Recommendation Book at least 4 to 5 weeks prior to CRD. Consider premium options, which may be limited. Be flexible in regard to equipment.

Europe → North America (TAWB)

  • Service disruptions to USWC and rail network to continue.
  • No further blank sailings were announced, but capacity remained the same, despite the demand boom.
  • Rates Sep 1 GRI likely to be implemented
  • Space Critical
  • Capacity/Equipment Tight and guaranteed only with premium rates
  • Recommendation Book 5 or more weeks prior to CRD. Request premium service for higher reliability/no roll.

India → North America

  • Rates remain high as congestion and omissions increase. This is a result of carriers looking to realign schedules as delays at destination due to berthing availability worsens.
  • Rates increased for 2H August. Expecting rates to continue to increase through September
  • Space is critical to USWC from all ports of loading in the ISC region. Omissions of India on crucial ISC to USWC services will continue to be an issue into September.
  • Capacity/Equipment Equipment of all types are in a deficit even at larger ocean ports such as Nhava Sheva. Inland Container Depots are seeing the worst of the equipment shortage due to the difficulty of repositioning.
  • 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. If routing to USWC, consider rerouting to USEC and transload to truck.

North America → Asia

  • Space is incredibly tight for USWC POLs. Capacity has improved from the USEC to Asia.
  • Rates Select carriers have announced GRIs for USWC to Asia on September 1 that we expect to be implemented.
  • Equipment Deficits are still plaguing IPI origins. Availability for standard equipment at ports has not been an issue, but any special equipment is hard to come by.
  • Recommendation Please place bookings 4 to 6 weeks in advance to secure your ideal sailing.

North America → Europe

  • There is excess capacity on the TAEB trade with carriers looking for cargo.
  • Rates remain steady going into September.
  • Equipment Deficits are still plaguing IPI origins. Availability for standard equipment at ports has not been an issue, but any special equipment is hard to come by.
  • Please place bookings 3 to 4 weeks in advance to secure your ideal sailing.

Air Freight Market Update


Asia

  • China: Due to the recent wave of Covid in mainland China, stringent control measures have been implemented at PVG, resulting in a lack of manpower and increased turnaround times for both inbound and outbound cargo. Select carriers have already cancelled some freighter capacity and many flights will likely have severe delays. Rates are expected to increase should restrictions continue.
  • Hong Kong: The market is picking up quickly, and capacity is very tight. Rates are expected to increase as a result. Ocean to air conversions are also leading to constrained capacity issues and will likely continue through September.
  • Taiwan: Ocean to air conversions are increasing in the market as peak season ramps up and the ocean situation remains constrained. Space is tightening quickly and carriers have announced rate increases beginning in the later half of the month.
  • Vietnam: Demand ex-Northern Vietnam remains strong and is expected to last through the end of August. Since space is tight, rates are anticipated to increase in the second half of the month. The Covid situation in Southern Vietnam continues to persist with more than half of the factories remaining closed, resulting in weaker demand.

Europe

  • Volume is quieter due to Summer vacations in Europe. Capacity can meet this demand to the US and the rates remain stable.
  • LATAM still more strained than the US for demand and capacity
  • Far East Eastbound volume is stable with no significant spikes this week. However, we do expect some disruption for imports into Northern China due to the Covid restrictions, imports to PVG in particular. Airlines are reluctant to take this cargo in favor of more time to turnaround flights for export.
  • Given the constraints on the Transpacific and reduced capacity due to Covid, we do see some European carriers offering solutions into the US via Europe to better optimize their flight network.
  • Still some delays are being seen at US ground handler terminals in ORD/JFK/LAX. Utilize secondary airports, such as IAD/BOS/DTW if lead times allow.

Americas

  • 100% screening requirement for all US export airfreight is in effect as of July 1, 2021. Ground handlers are still reporting long lines for cargo throughput. Many have implemented new, earlier close outs for exports to accommodate the additional time. They’re still working to find the right rhythm.
  • Export demand from the US remains steady and stable while US air exports are experiencing some manageable capacity constraints. Large shipments from all major outbound gateways in the US may take 2 to 4 days from booking to uplift into key European and Asian destinations. Capacity from the West Coast and Midwest Gateways is most constrained to Central Europe (AMS/CDG/FRA) and Asia (PVG/HKG/NRT/TPE), while East Coast capacity remains balanced and manageable.
  • Space to India opens up, even as Nepal, Bangladesh, and Indonesia remain very constrained as aid and relief efforts into the Covid-struck region continue.
  • LAX/ORD/JFK ground handlers facing large backlogs are using off-airport facilities to manage the flood of cargo. Ground handlers report 2 to 5 days of backlog to break down import freight. Export cargo cannot be tendered earlier than 2 days before departure as a result. The most congested carriers' terminals started to restrict or embargo US export freight until further notice.
  • Trucking remains scarce for airport transfers and local pickup and deliveries across the nation and especially around major international in- and outbound hubs.

Updates from Flexport's Customs & Compliance Team

CBP Moves Drawback Operations from Ports to Centers

CBP will be moving its drawback program and specialists from ports of entry to the Centers of Excellence and Expertise (CEEs). Five Centers will each manage two industries, but the processing and transmission of claims, along with ruling and privilege application request submissions will remain as it was under the previous structure.

Read more: Declarations, Duties, and Drawback: Customs Brokers Streamline Trade with up to 99%+ Data Accuracy

US, Uruguay Discuss Closer Trade Relations

Assistant US Trade Representative (USTR) Daniel Watson and Uruguayan Director General for Economic Affairs Victoria Francolino met and agreed to review existing trade agreements and to develop new instruments to reflect contemporary trade rules supporting areas of Trade Facilitation, Good Regulatory Practices, Anti-Corruption, and Digital Trade.

CBP Issues Ruling on Chinese Components Transformed in Mexico

CBP found that car seats containing components of Chinese origin are spared from Section 301 tariffs because the components are “substantially transformed” in Mexico. CBP said the Chinese components cannot alone create the seat frame and are an integral part of the car seats. Additionally, a majority of other components are of Mexican origin. This ruling is the latest in a series of rulings concerning the inclusion of Chinese components in products manufactured or assembled in México.


Factory Output News

China Ningbo Meishan Port (MSICT) remains suspended from Aug 11 until further notice due to a staff Covid-19 case. Some vessels originally planned to call MSICT are moving their calls to other terminals. [Source]

Taiwan The National Development Council approved a 5-year investment plan to renovate seven ocean ports in Taiwan to increase ports capacity. [Source]

Vietnam Ho Chi Minh extends its movement curbs until the end of August. [Source]

Philippines First case of Lambda variant reported in Philippines amid record daily numbers. [Source]

Italy A digital Covid-19 certificate with a QR code will be mandatory in Italy's restaurants and other public spaces as the government works to curb infections. [Source]

India India will launch Gati Shakit, a 100 trillion-rupee (US $1.35 trillion) national infrastructure plan to help generate jobs and expand the use of cleaner fuels to achieve the country's climate goals. [Source]

Bangladesh The total number of people hospitalized with dengue fever has passed 6000. Approximately 3,442 were hospitalized in the first 14 days of August, compared to 2,286 in July. The incidents are due to increased prevalence of the Aedes mosquito in Dhak amid the ongoing Covid pandemic. [Source]

Sri Lanka Sri Lanka banned all public gatherings and weddings amid a worsening Covid-19 situation. An island-wide overnight curfew will also be enforced, but no lockdown is implemented yet. [Source]

Pakistan Pakistan has become an exporter of smartphones with its first-ever shipment to the UAE. The first consignment of 5,500 units of 4G were manufactured by Inovi Telecom. [Source]

Freight Market News


Ningbo Covid Case Impacts Capacity The BBC reports the partial closing of the Ningbo terminal, due to a Covid case there, will cut the port's capacity for container cargo by about a quarter, threatening key supply chains ahead of peak season.

Canceled Flights Cause Chaos in China The Loadstar reports ground handling staff in China are quitting over new Covid rules, leading to the cancellation of hundreds of flights and increased rates. Export handling times are up to two to three times longer than normal.

Read More: A Field Guide to Southeast Asia Supply Chain Options

Anchorages Filling on Both US Coasts In the early days of peak season, port congestion is building on both the East and West Coasts. According to FreightWaves, there were 125 ships either at berth or anchor in LA/LB on Friday—a new record above the 113 in Q1. On the East Coast, congestion has centered around Savannah, GA with 17 ships at anchor off Tybee Island on Monday.

Read More: Restock Before You Run Out: Smaller Shipments Could Move Crucial SKUs

Economic highlights from Flexport Chief Economist Dr. Phil Levy

Consumer Sentiment Plunges The University of Michigan’s index for August fell 13.5% from July, one of the largest drops in its history. The August level was below that recorded in April 2020. While the index of Current Economic Conditions fell 7.8%, the Index of Consumer Expectations fell 17.5%. One interpretation is a new pessimism accompanying the spread of the Covid Delta variant.

The ZEW Economic Sentiment Index for the Euro Zone fell by 30.2%, more sharply than forecast.

Strong UK GDP Growth. The economy grew by 4.8% from Q1 to Q2, and is up 22.2% from a year before. It is still 4.4% below its peak in 2019:Q4.

Japanese Growth Positive in Q2 After shrinking in Q1, the Japanese economy expanded by 0.3% in Q2, or an annualized 1.3% rate.

US Producer Prices Jump by 1.0% in July over June, for a 7.8% increase over the last 12 months, notably faster than CPI.

US Labor Productivity Up in Q2 at a 2.3% annual rate, down from 4.3% in Q1.

Euro Zone Exports Down 0.7% in June for a 6th consecutive monthly fall. Imports were flat.


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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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