Freight Market Update: October 5, 2021
Ocean and air freight rates and trends; customs and trade industry news plus Covid-19 impacts for the week of October 5, 2021.
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Ocean Freight Market Update
Asia → North America (TPEB)
- TPEB floating market rates soften due to reduced demand. This drop is primarily due to both the Chinese Golden Week holiday and reductions in production out of China as the result of ongoing electric power constraints. Congestion flare-ups, which in turn create strains and bottlenecks, are expected to continue, with estimates for a return to pre-Covid congestion pushed out as far as spring of 2022. Demand levels are still expected to be strong, though, until inventories are replenished to sufficient levels.
- Rates Several carriers have extended or reduced rates in 1H October, but rate levels remain high.
- Space Critical
- Capacity/Equipment Critical/Severe Undercapacity
- Recommendation Continue to book well in advance (at least 4 weeks) prior to CRD for best chance of hitting targets. Consider terminating cargo at destination coastal ports to prevent intermodal delays.
Asia → Europe (FEWB)
- Space and equipment crunches continue. Market demand is consistently exceeding supply, and rates have skyrocketed for quite a long period. Overall space situation is worsened by blank sailings and poor equipment availability. Carriers are overcommitted and are limiting booking acceptance or rolling shipments. With continuous vessel delays and shiftings, schedule reliability is very low.
- Rates Rates remain at a record high level, but have been stable going into September and a marginal increase in October. Most carriers have extended their premium rates.
- 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)
- Terminal congestion along the US East Coast not easing with Savannah now counting 27 vessels waiting for berth. Congestion at LAX/LGB port is still critical with over 60 vessels in queue. Rates remain high and expect to maintain at these levels at least till end of Q4 due to tight capacity.
- Rates GRI October 1 implemented
- Space Critical
- Capacity/Equipment Capacity remains tight for both North Europe and Mediterranean services. Better equipment availability at port, shortages remain at inland depots.
- Book 5 or more weeks prior to CRD. Request premium service for higher reliability and no-roll guarantees.
India → North America
- Equipment deficits and port of loading/discharge omissions continue. Carriers are looking to re-align vessel schedules in an effort to increase schedule reliability. Congestion at Port of Savannah and a market shift to USEC are the main contributing factors.
- Rates Increased for 1st half of October
- Space remains a challenge as global congestion is resulting in omissions and altered sailing schedules
- Equipment of all types are in deficit. Carriers are working to reposition empties while also placing large orders of new equipment.
- Recommendation Use premiums on urgent shipments and shipments with CRD approaching. If routing to USWC, consider rerouting to USEC. Be flexible with inland container depot (ICD) location and equipment type.
North America → Asia
- Space continues to be tight for USWC POLs. USEC capacity has been more readily available; Deteriorating schedule integrity in addition to creating void sailings and delays is creating significant challenges with posted earliest return dates and vessel cut-offs at the port.
- Rates Multiple GRI’s announced for dry and reefer cargoes for Oct 15 expected to be implemented.
- Equipment Deficits on containers and chassis 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 available capacity on the TAEB trade with carriers looking for cargo from the US East and Gulf Coasts. US West Coast service to Europe is extremely tight.
- Rates to remain steady for October.
- 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 for East Coast/Gulf sailings and 4 to 6 weeks for Pacific Coast sailings.
Air Freight Market Update
- N.China: Golden Week began this week, and the market and rates are stable. We expect the following week will be relatively weak but production will likely recover soon.
- S. China: There is some decline in demand this week due to the holiday, however requests for Q4 capacity are still strong. Ocean conversions and projects remain hot in the market.
- Taiwan: The TPEB market is tight, and there continues to be strong demand for ocean-to-air conversions; however, rates remain steady. Demand in the FEWB market is strong and is outpacing supply as capacity and flight frequencies are lower than those of TPEB. This is leading to some congestion at origin. Several carriers have also announced rate increases effective beginning this week.
- SE Asia: Space ex-BKK on the TPEB lane is extremely tight with several carriers not accepting new bookings and the rest only taking small shipments for longer transit times. The FEWB lane has been affected by congestion at transit hubs, particularly in the Middle East. Space ex-HAN is full through the week. Demand is also expected to surge in the second half of October due to the approaching holiday season, post-Golden Week production picking up, and continued congestion at transit hubs. FEWB rates are reaching the highest point in the last 4 months. Similar to HAN, SGN space is fully booked for the week and space is very tight. Factories will start gradually resuming work, but labor shortages, travel restrictions, increasing costs of raw materials, and insufficient supplies for components may affect production. As lockdown restrictions ease, production is expected to take off and demand to increase sharply. The second half of October is anticipated to be a super peak period.
- No changes to demand. This is stable WoW. Rates still have remained steady as there is enough capacity to meet demand.
- PAX capacity injection from November onwards on the TAWB. Fully vaccinated EU travelers will be allowed to enter the US, vice versa for US travelers entering the EU. This is promising for air cargo, as any uptick in demand before various holidays in the US can be met with more capacity quickly. Potentially a sign of a more stable peak season on TAWB when compared with other tradelanes.
- EU airlines still offer attractive solutions into US hubs via secondary hubs. This is keeping the rate levels stable.
- Far East Eastbound back to full operational capacity. Expect an increase in demand as Golden Week comes to a close on Friday.
- Heavy strain on EU ground handling terminals at AMS and FRA. Manage expectations with clients accordingly and build extra lead time accordingly.
- Advice continues for all trade lanes ex EU: Place bookings at least 7 days ahead of CRD for most optimal rates and routing solutions.
- US: Exports to China will decrease this week due to Golden Week. Demand to Europe and LATAM remain steady and stable. Larger shipments from major outbound gateways can take 2 to 4 days from booking to uplift into the EU, LATAM, or Asia.
- LAX/ORD/JFK ground handlers continue to face large backlogs and are using off-airport facilities to manage the flood of inbound cargo, which has a trickle-down effect on the export side. Many have implemented new, earlier close outs for exports to accommodate longer throughput times and screening requirements.
- Rates haven’t experienced any significant changes compared to the previous week.
- Recommendation Book early considering the dwell time at airports.
Updates from Flexport's Customs & Compliance Team
US Will Not Take Tariff Action Against Vietnam
The Office of the US Trade Representative announced that its investigation into environmental concerns in Vietnam’s timber industry has resulted in an agreement with the Vietnamese government, staving off Section 301 tariff action on Vietnamese imports. The Agreement calls for Vietnam to “keep illegally harvested or traded timber out of the supply chain and protect the environment and natural resources.”
USTR Provides Update on China Trade Policy
On October 4, Amb. Katherine Tai gave a speech outlining a soft framework for the Biden Administration’s approach to trade with China. She gave few specific details on how importers will feel any policy changes, but confirmed that Section 301 Exclusions will return at some point. She did not confirm whether the exclusions would be retroactive to the slew of expirations in the autumn and winter of 2020.
Factory Output News
US New orders for manufactured goods rose 1.2% in the month of August to a record high of $515.7 billion. Excluding transportation equipment, manufacturing orders rose 0.5%. Overall, new manufacturing orders have risen 10.1% year to date. [Source]
US Factory shipments inched up 0.1% to an all time high, although at a slower pace than the 1.5% gain seen in the prior month. Excluding transportation equipment, total shipments rose by 0.6% in August and 9.0% year to date. [Source]
Taiwan Taiwan business leaders seek support from the Vietnam government on Taiwan’s bid to join the Comprehensive and Progressive Agreement for Transpacific Partnership (CPTPP). [Source]
Cambodia Cambodia raises textiles and footwear minimum wage by $2.70 - Government’s balancing act to keep cost competitive for brands while satisfying influential unions. [Source]
Thailand The Thai government is planning to launch a national shipping company in June 2022 to reduce reliance on foreign ships and promote the logistics sector [Source]
Indonesia Indonesia and China launched a new framework to allow the use of local currencies in bilateral trade, while facilitating trade and investment for the two countries [Source]
India The Sri Lanka Ports Authority (SLPA) has signed a $700M agreement deal to build a strategic deep-sea container terminal with an Indian Company. The new terminal will be 1.4 kilometres in length, with a depth of 20 metres and an annual capacity to handle 3.2 million containers. [Source]
Sri Lanka World bank to provide $500 million financial support for Sri Lanka to build better road network [Source]
Europe After causing chaos in the UK, truck driver shortages could soon hit the rest of Europe [Source]
Bangladesh India and Pakistan growth in ready-made garment exports to EU and US has surpassed Bangladesh in the first 7 months of 2021 [Source]
Freight Market News
Ports of NY and NJ Impose Fee on Absent Truckers On Friday, Oct. 1, the Ports of NY and NJ began imposing a new administrative fee of $62.49 on truckers who miss appointments for import retrievals in effort to increase efficiency and speed up delivery, according to JOC.
US Exports Rising Despite Challenges Although more empty containers are leaving US ports to be reloaded in Asia rather than full cargo, US exports are on track for a record year according to FreightWaves. Census Bureau statistics show the value of US goods exports from Jan-July 2021 topped those in any previous year, reaching $990 billion.
Economic highlights from Flexport Chief Economist Dr. Phil Levy
One US Crisis Deferred, One Remaining: Congress averted a shutdown with a continuing resolution for funding through Dec. 3. Meanwhile, Treasury Secretary Yellen cited Oct. 18 as the deadline for addressing the debt ceiling, which was not extended by the CR.
US Consumption Up. Real Personal Consumption Expenditures (PCE) were up by 0.4% in August, reversing a decline in July. Goods consumption grew faster than services consumption, though durable goods consumption shrank. New orders for durable goods were up by 1.8% for the month.
The closely watched PCE deflator showed continuing inflation, though how much depended on the version. Straight-up was up 4.3% from a year earlier, excluding food and energy up 3.6%, and “trimmed mean” up 2.0%.
For September, US consumer confidence hit a 7-month low.
US Trade Expands. Preliminary data showed exports (0.7%) and imports (0.8%) rose in August over July. On a year-over-year (YoY) basis, total goods activity climbed 20.7% to August. YoY, exports jumped 25.6%, with surging commodity prices driving a 45.7% increase in Industrial Supplies. The automotive industry lagged with a 7.4% contraction YoY and a 20.8% decline versus 2019, likely due to the semiconductor shortage.
Signs of Chinese Slowing. Manufacturing PMI dropped into contractionary territory for the first time since Feb. 2020. Energy shortages (see below) may have hit new factory orders. Export order expectations meanwhile contracted for a fifth straight month and at 46.2 (below 50 indicates contraction) reached their worst since June 2020.
Chinese factories are limiting their production in response to power supply shortages. Those in turn are linked to rapidly rising demand, high fuel costs and carbon emissions targets from the government.
Japan’s New Prime Minister will have to deal with August drops in factory output and retail sales.
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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.