Market Update

Freight Market Update: February 16, 2021

Ocean and air freight rates and trends; customs and trade industry news plus COVID-19 impacts for the week of September 9, 2020.

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Ocean Freight Market Update


Asia → North America (Transpacific Eastbound)

  • Rates: Extended
  • GRI Feb 15: None.
  • Capacity: Recommend advance booking notice at least 21 days prior to CRD.
  • Notes: Rates extended at 1H February levels through the end of Feb. Carriers are expecting Demand to remain strong through March and into April. Equipment shortage situation has not improved since levels in the past few months, extreme challenges remain.

Asia → Europe (Far East Westbound)

  • Rates: Extended
  • GRI February 1: Mostly extended until end of the month
  • Capacity: Recommend advance booking notice at least 21 days prior to CRD.
  • Notes: Rates remain at high but stable levels expected to persist until the end of February. Due to CNY, week 7 and 8 will be quiet; expect volume recovery from week 9 onwards. With the severe equipment shortage expected to last through Q1, flexibility on equipment substitution is advised. There are 8 CNY blank sailings announced so far (four by Ocean Alliance, three by 2M and one by The Alliance). Widespread restrictions for UK cargo mostly remain.

Europe → North America (Transatlantic Westbound)

  • Rates: Increased
  • GRI February 15: Implemented
  • GRI March 1: Likely implemented (North Europe and Med)
  • Capacity: Recommend advanced booking notice 5 weeks prior to CRD.
  • Notes: We recommend requesting premium service for bookings placed at shorter notice. The strong market is expected to continue through April as carriers report full vessel utilization up to 6 weeks ahead of ETD with high volume likely well into Q2. Expect further rate increases in March.
  • Supply remains extremely tight across Europe. There are shortages of Reefer containers and 40’/HC dry, in particular in Germany, Italy, Spain and Portugal, plus severe equipment deficit in Turkey. Book as early as possible.
  • Port congestion: Slow terminal operations at Benelux and Germany ports impacted by bad weather conditions. Felixstowe and Southampton are still congested due to high import volumes.
  • Capacity development: new blank sailings announced on the AL1 and AL6 in week 9 and week 14. Expect void sailings to continue through March/April as carriers try to recover schedule reliability.

India → North America

  • Rates: Increase
  • GRI February 15: Implemented
  • GRI March 1: Pending, likely
  • Capacity: Space is extremely full and rolling to USWC. Space is tight to USEC. Transhipment at SIN/CMB has 1-3 week delays.
  • Equipment: Continues to be an issue—please make bookings in advance so forwarders can plan for container availability at your local ICD/wet port. Consider moving 20GP instead of 40GP/HC. Recommend utilizing premium services to secure equipment faster.
  • Demand is strong and quickly increasing through February as we approach the end of the Indian fiscal year.

North America → Asia

  • Rates: Increasing
  • GRI March 1—Multiple rate increases announced, concentrated on US West Coast ports. A few carriers have also announced significant GRI’s just for reefer containers.
  • Ocean carriers and the Terminals in China will not be waiving demurrage/storage for any containers arriving during the Chinese New Year holiday. All containers will need to be removed from the terminal at the standard provisions in order to avoid charges.
  • Capacity: Recommend advanced booking notice 7-10 days prior to CRD at Port.
  • Capacity: Recommend advanced booking notice 10-14 days prior to CRD at Rail Ramp.
  • Chassis availability is tight at most major ports and rail ramps. Recommend factoring in more lead time for truckers to procure chassis.
  • Port of LA situation remains very fluid. Vessel schedule integrity is completely off, causing vessel bunching and smaller windows for container delivery.

North America → Europe

  • Rates: Steady
  • Capacity: Recommend advanced booking notice 7–10 days prior to CRD at port.
  • Capacity: Recommend advanced booking notice 10–14 days prior to CRD at rail ramp.
  • Chassis availability is tight at most major ports and rail ramps. Anticipate more lead time for truckers to procure chassis.

Air Freight Market Update


Asia

  • The air freight market has remained very strong despite the CNY holiday being in full swing. The combination of strong demand and reduced capacity (as a result of previously planned aircraft maintenance etc.) has resulted in peak-level rates and very little available capacity. Rates are highest out of North Asia and Southeast Asia on both the TPEB and FEWB trade lanes.
  • Given the recent quarantine restrictions in HKG, forcing CX to cancel over 30% of their long-haul schedule effective Feb 20th, high rates and a very capacity constrained market are expected for the foreseeable future.

Europe

  • While rates remain high, capacity ex Europe to Asia is constrained due to CNY. Capacity to North and South America has been further constrained due high demand driven by automotive & manufacturing and the pharma industries, while some carriers dialed back on numbers of flights.
  • Capacity constraints have led to even more increases of underlying air-freight rates to North and South America.
  • Main airports in E.U. are fully operational and continue to show strong throughput numbers.

Americas

  • TPWB trade is showing slower demand into all Asia hubs due to CNY and carriers are working through some of the backlogs reported last week on the West Coast and Midwest into HKG and Japan. Cancellations during CNY throughout this week are in effect with most flights being reinstated at the end of this week going into next week.
  • LATAM SB continues to see increased activity with backlogs reported to destinations such as Chile, Brazil, Argentina, but capacity is gradually infused into the market again, after a peak flower season due to Valentines Day. Capacity to Central America remains heavily constrained.
  • TAEB capacity is available to Continental Europe and the U.K. and carriers are reporting high load factors and stable rates.

Factory Output News

US Manufacturing activity in the New York Federal Reserve Bank’s district expanded at the fastest pace since July 2020, primarily driven by stronger growth in new orders, employment, and hours worked. Inventories grew for the first time since March 2020. [Source]

Singapore recorded to be on path to recovery as GDP beats estimates. GDP fell 2.4% YoY in the quarter versus the 3.8% drop seen in the government’s advance estimate. Analysts had expected a contraction of 3.5%, according to a Reuters poll. [Source]

Philippines Remittances have seen a 0.8% drop to USD$29.9 billion in 2020 since 2001. Relatively modest rebound expected due to redeployment of workers who were repatriated home but will be dependent on travel restrictions and vaccinations. [Source]

Malaysia Economists see hints of stagflation in Malaysia as COVID-19 cases increase and recovery is prolonged with rising inflation amid high unemployment rate. However, it may be avoided if global trade improves and necessary measures are taken. [Source]

Thailand’s economy suffered its worst full-year performance in more than two decades due to drops in tourism and ongoing political upheaval. 2020 saw 6.1% contraction, compared to a 7.6% decline during the Asian financial crisis in 1997. Economic growth is downgraded to 2.5-3.5% from a previous estimate of 3.5-4.5%. [Source]

Updates from Flexport's Customs & Compliance Team

CBP Publishes FAQ on Xinjiang WRO’s

On February 12th, Customs & Border Protection (CBP) posted answers to Frequently Asked Questions (FAQs) to help guide importers through the Withhold and Release Orders (WROs) issued on cotton and tomato products produced using forced labor in the Xinjiang Uyghur Autonomous Region. The FAQ’s cover topics including proof of admissibility and due diligence.

301 Tariffs on EU Goods to Remain Unchanged

A February 12th Federal Register posting announced that the U.S. Trade Representative (USTR) would not be revising the list of European goods subject to additional tariffs issued as a result of the Section 301 investigation involving “the enforcement of U.S. rights in the World Trade Organization dispute involving Large Civil Aircraft subsidies provided by certain current or former member States of the European Union.” The most recent revision to the list of goods subject to additional duties was effective on January 12, 2021.


Economic highlights from Flexport Chief Economist Dr. Phil Levy

  • Japan’s economy grows. In Q4, the economy expanded at an annualized 12.7% rate, beating most forecasts. That included an 11.1% jump in exports. It was the second quarter of growth after a Q2 plunge and resulted in an overall 2020 GDP contraction of 4.8%—better than initial estimates. Looking forward, Japan is currently under a pandemic state of emergency. Trade growth also depends on the recovery of key export markets.
  • 2020 UK GDP reports are disastrous with the economy contracting by 9.9%, the largest annual drop in 300 years, just worse than 1921, but not as bad as the Great Frost of 1709.
  • German exports went up slightly in December, rising 0.1% on the month. Imports fell 0.1%. For the year, exports to China increased 11.6%, while those to the US rose 8.4%.
    • In December, German exports to the UK fell 3.3%, while imports from the UK dropped 11.4%.
  • US inventories rise as total inventories of merchant wholesalers were up 0.3% (SA) from November to December 2020. They were down 1.6% from December 2019.
  • US consumer sentiment drops. The University of Michigan preliminary index fell to 76.2 in February, down from 79.0 in January. It was the lowest reading since August, with the drop concentrated in households with income below $75K.

Freight Market News


FMC Meets About Detention and Demurrage US Federal Maritime Commission leaders are meeting to resolve ongoing issues around container returns and availability, plus detention and demurrage fee enforcement. Supply Chain Dive reports some carriers may be charging the fees in circumstances that misapply FMC guidelines.

Congestion Characterizes Chinese New Year Despite the usual calm during Chinese New Year, this year’s congestion at transpacific gateways is still high. According to the Journal of Commerce, some factories stayed open, but China Customs took the week off, exacerbating the backlog.

UK Could Shift to Feeder Market Congestion continues to wreak havoc in Europe, where some deep-sea vessels are avoiding UK ports, leaving cargo in northwestern Europe instead. The Loadstar reports that rerouting could relegate the UK to a feeder market, causing additional market shifts in the future.


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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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