Market Update

Freight Market Update: August 24, 2021

Ocean and air freight rates and trends; customs and trade industry news plus Covid-19 impacts for the week of August 24, 2021.

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Ocean Freight Market Update


Asia → North America (TPEB)

  • Peak season is underway and expected to place further strain on the TPEB trade. Strong forecasts from suppliers and importers suggest that peak will continue through to Chinese New Year 2022. Capacity remains reduced due to accumulation of delays, congestion, and blank sailings - all despite extra-loaders and charters in the market. IPIs remain limited and challenged by congestion.
  • Rates August 15 GRI implemented, September 1 GRI expected
  • 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 and upcoming Golden Week blankings.
  • 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 Sept 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

  • Severe Colombo congestion persists with Covid-related lockdown in Sri Lanka. 2 to 3 week-long transshipment delays in Colombo, South/East India, and Bangladesh Cargo recommended to avoid Colombo if possible.
  • Rates increased for 2H August to both the USEC and USWC. Expecting rates to continue to increase through September
  • Space remains extremely constrained to USWC from all ports of loading in the ISC region, especially with the congestion in Colombo. Space to the USEC is tight.
  • Capacity/Equipment Equipment of all types are in 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. If routing to USWC, consider rerouting to USEC and transload to truck. Avoid Colombo if possible, carriers are offering more services using feeders to Western India.

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 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 very tight.
  • 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 for East Coast/Gulf sailings and 4 to 6 weeks for Pacific Coast sailings.

Air Freight Market Update


Asia

  • Shanghai / PVG: Five Covid cases discovered in PVG airport last week, related to airline ET, terminal handler PACTL and ground service provider SIAS, are affecting flight operations industry-wide with many flights being put on hold. Flexport is rerouting some charters to depart from HKG instead of PVG. Space is scarce, and only smaller shipments get prioritized by airlines. The Transit time ex-PVG will be extended by 5 to 7 days compared to previous week for TPEB lanes. EU destinations are currently delayed by 2 to 3 days.
  • Hong Kong: The market continues to pick up and capacity continues to remain tight, due to the situation in Shanghai and ocean conversions that continue throughout September.
  • Taiwan: Ocean to air conversions are increasing in the market as peak season ramps up and the ocean situation remains constrained. Unchanged from previous week.
  • Vietnam: The lockdown has been extended to September 15 with more strict procedures and more Covid-19 cases were found at the SGN terminal, which led to a limited transportation quota and lack of workforce. The terminal is only operating partially, and cargo transfer from other locations to SGN is currently suspended. Additionally, China-based carriers have cancelled flights, leading to lesser supply in the market and a slight rate increase week over week.

Europe

  • No changes/increases in volume so far this week. Capacity can still meet the demand in the market on the TAWB. Rates stable. Some factories will reopen next week (Italy/Portugal)
  • Disruption is becoming evident on the Far East Eastbound from Europe. Multiple airline carriers embargoing PVG bound cargo until further notice from the operational issues due to a Covid outbreak in a ground handling terminal. Expect an increase in cargo into surrounding airports if restrictions allow, and road feeder services to PVG. Rates likely to increase on the FEEB in the coming weeks
  • 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
  • US ground handler terminal congestion still persists, but secondary airports can be a viable alternative if the lead times allow
  • Advice for all trade lanes ex EU: Place bookings at least 7 days ahead of CRD for most optimal rates and routing solutions

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.
  • In terms of capacity, the most affected destination is PVG. Operations at the PVG airport have been partially suspended due to additional COVID-19 cases. The current situation could potentially generate some capacity constraints in other Asian hubs (HKG/ICN/TPE). Rates into North Asia are increasing. Capacity to Central Europe (AMS/CDG/FRA) is constrained but 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.
  • Trucking remains scarce for airport transfers, local pickup, and deliveries across the nation, especially around major international in- and outbound hubs.

Updates from Flexport's Customs & Compliance Team

CIT Extends Deadlines in Section 301 Litigation

The Court of International Trade (CIT) extended the preliminary injunction preventing the liquidation of unliquidated customs entries with List 3 and 4A tariffs to October 4, 2021. Additionally, the CIT extended the deadline for CBP to create a repository for the affected entries to September 3, 2021. Note that the affected entries are only those that are part of the litigation, not a blanket application for all entries with List 3 and 4A tariffs.

CIT Delineates Duty Refund Requests in Recent Case

The CIT ruled against Otterbox’s request to apply a victory in a separate CIT case to a prior disclosure Otterbox filed in December 2013. The CIT said it does not have the authority to order reliquidation to entries not relevant to the separate CIT case Otterbox won. The CIT has repeatedly ruled in favor of a strict applicability of their powers to order reliquidation and thus duty refunds.


Factory Output News

Mainland China PVG Terminal Operation - A total of five Covid-19 cases are confirmed. Due to shortage of manpower, some pax freighter/freighter service will be cancelled/suspended until further notice. [Source]

Taiwan Driven by global demand, industrial production in Taiwan has been growing for 18 consecutive months as of July. [Source]

Japan Toyota succumbs to chip shortage and will reduce production by 40%. [Source]

South Korea Korean Ocean Carrier HMM sailors have voted in favor of staging a workforce strike in their ongoing negotiations with the carrier over wages. [Source]

South Korea Typhoon Omais causes flooding in the Southern area of the Korean peninsula near Busan, resulting in the evacuation of 10,000 residents. [Source]

Vietnam Vietnam issues most stringent lockdown order yet, starting August 23 in Ho Chi Minh City with troops deployed. [Source]

Thailand Pilot “Factory Sandbox” to isolate and protect their manufacturing industry. [Source]

Indonesia Garuda shifting focus to cargo growth amid dropping passenger flights, aiming for 30% cargo growth this year. [Source]

India India recorded its sharpest decline of Covid-19 cases in nearly 2 weeks by 13.6%. This is the first double digit fall in weekly cases since the last week of June into July. [Souce]

Bangladesh Bangladesh apparel makers have demanded the National Board of Revenue prevent a shift of import containers to private off docks, which would triple the delivery cost. Not only is the delivery cost more expensive, it will also take five more days to deliver to the port yard. [Source]

Sri Lanka Sri Lanka announced a nationwide lockdown on Friday. The lockdown will spread across 10 days and will end on August 30. [Source]

Freight Market News


US Exports Dip in July The Loadstar reports the gap between import and export volumes for the US widened last month to a record 2.75x and is on course to widen further in August. Exports from Los Angeles and Long Beach fell by 27.6% and 20.7%.

Read More: New Post-Covid Indicator Predicts Goods Demand Rising High by Fall

Congestion Continues at Ningbo, and Worldwide While Yantian set a record for the number of containers handled last week, congestion continues globally as 409 container ships with an estimated capacity of 2.7M TEU are anchored, 80 of which are waiting at at Ningbo as of August 18 according to Maritime Executive.

Airport Lockdown in Shanghai According to Reuters, five workers at Shanghai Pudong Airport led to hundreds of people being placed in quarantine. FreightWaves reports the outbreak has halted more freighter activity at the airport and will have a major impact on supply chains reeling from ocean and air capacity shortages as peak season begins.

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

Economic highlights from Flexport Chief Economist Dr. Phil Levy

Euro Zone GDP grew in Q2 at a 2.0% quarterly rate (8.2% annual rate). Of the four largest economies in the zone, Spain (2.8%) and Italy (2.7%) grew the fastest, while Germany (1.5%) and France (0.9%) were slower.

Inflation in the Euro Zone was 2.2% in July, up from 1.9% in June and over the 2% target.

July US retail sales fell 1.1% after seasonal adjustments. The biggest declines were in autos and nonstore retailers.

US industrial production went up 0.9% in July, following a 0.2% increase in June. Manufacturing was up by 1.4%.

Japanese exports grew in July, though slightly slower than expected, up 37.0% year over year. Semiconductor exports climbed 27.8% (from 24.7%), highlighting the complexity of the semiconductor situation.

WTO Goods Trade Barometer climbs. The index of leading indicators for merchandise trade saw every component report strength. The figures seemed in line with a forecast of an 8% global trade volume increase in 2021.

Mexico has launched an auto dispute with the United States under the USMCA. The disagreement centers on how difficult it should be to meet 75% rules of origin.


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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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