Freight Market Update: April 27, 2021
Ocean and air freight rates and trends; customs and trade industry news plus Covid-19 impacts for the week of April 27, 2021.
Ocean Freight Market Update
Asia → North America (Transpacific Eastbound)
- Rates: Increases coming May 1.
- Notes: 2021 contract season is kicking off with more congestion and demand than ever. Significant changes are near, including rate-level increases and carriers limiting inland bookings. Market-rate levels are increasing on nearly all lanes, with Suez Canal fallout making East Coast destinations the most impacted. The moving-rate level to the East Coast and Gulf is climbing with demand for all available space (even at higher premiums) pushing rates higher. Many carriers have indicated that they are not accepting bookings to inland locations due to extreme bottlenecks at rail yards. Memphis, Kansas City, and Chicago are suffering the most with consistent volume in, but too few chassis to exit containers from the rail yard.
Asia → Europe (Far East Westbound)
- Rates: Increased
- GRI Apr 15: Rate increases from most carriers as a result of tight space and equipment due to Suez Canal situation
- GRI May 1: Significant rate increases across all carriers due to high demand and insufficient capacity
- Capacity: Recommend advance booking notice 3 or more weeks prior to CRD.
- Ripple effect from Suez Canal blockage will become very visible in the next few weeks with numerous blank sailings from Ocean Alliance and The Alliance. Capacity is severely reduced in weeks 17/19/21. Equipment shortage has become very serious again esp ex-Shanghai and outports. Both space and equipment will be very challenging in the coming month.
Europe → North America (Transatlantic Westbound)
- Rates: Increased
- GRI April 15: Implemented
- GRI May 1: likely
- Capacity: Recommend advanced booking notice at least 5 weeks prior to CRD.
- Notes: Market expected to remain dynamic through Q2 as capacity stays heavily constrained. Booking early is key to securing space. Use Premium products for the urgent cargo needing higher reliability.
- EQ supply is extremely tight across Europe as port congestion and lower vessel capacity hinder empty-container repositioning, particularly at inland depots. Allow flexibility in routing and empty pick up from the port.
- Capacity development: one upcoming blank sailing: week 19 AL1 (NEU to USEC). Expect more void sailings and change of port rotation / port omissions announced at short notice in the mid term as carriers try to recover weekly schedule integrity.
India → North America
- GRI May 1: Likely
- Capacity: Space is extremely tight out of the ISC with signs of capacity relief coming from Bangladesh and Sri Lanka. Suggested booking remains at 15-20+ days prior to CRD.
- Equipment: Inventory at many of the largest ports is starting to ease although we still expect equipment to be an issue for the next few months due to new Covid lockdowns and lingering effects of the Suez Canal blockage.
- Notes: We continue to recommend booking urgent cargo on Premium no-roll services.
- COVID Updates—ISC region is facing a new wave with 100K+ new cases daily. Bangladesh has announced a one-week full lockdown (originally until 4/21 extended to 4/28 with possible further extension) while much of India is starting to enforce restrictions. These restrictions in both Bangladesh and India so far do not affect manufacturing and logistics services directly, but delays will arise from labor shortages.
North America → Asia
- Rates: Increasing
- GRI May 1: Three carriers intend to implement a GRI for all Asia destinations.
- GRI May 15: GRI notification received from one carrier
- Capacity: Recommend advanced booking notice 14-21 days prior to CRD at Port.
- Capacity: Recommend advanced booking notice 14-21 days prior to CRD at Rail Ramp.
- Capacity availability from the port of LA to all Asia destinations has grown tighter due to voided sailings. Would recommend at least 3 weeks lead time on new bookings.
- Chassis availability is tight at most major ports and rail ramps, Kansas City in particular. Recommend more lead time for truckers to procure chassis.
- Severe vessel congestion at both US coasts continues to move vessel cut-off dates and earliest return dates.
- Ongoing TPEB vessel delays are affecting turnaround at export ports, LA worst of all.
North America → Europe
- Rates: Steady
- Port congestion along the US East Coast and in North Europe impacts vessel-schedule integrity for all services, causing capacity loss week to week as ships make up time. We urge booking sooner to help ensure coverage.
- The limited capacity for all-water service from the US West Coast to Europe has grown increasingly tight. Would strongly suggest placing bookings with at least 3-weeks lead time.
- Capacity: Recommend advanced booking notice 14-21+ days prior to CRD at port.
- Capacity: Recommend advanced booking notice 14-21+ 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 export remains at super-peak levels with rates in some origins like TPE and BKK approaching the levels only seen in May 2020 during the height of the PPE frenzy. With demand outstripping capacity, flights are full across the board until middle of May at the earliest.
- Current market conditions expected to continue through June based on large amount of cargo in pipeline.
- Further impacting capacity are positive Covid tests from China Airlines flight crews. Nine crew so far have tested positive without the government yet tightening.
- European export demand shows continued strength to the Americas and Asia. Space to the U.S. West Coast remains constrained. No meaningful capacity into North America was added over the past week. Space to Asia remains very well utilized especially into China and Japan. Carriers across the board report very high load factors.
- Space to and from India and Bangladesh, appears to be scarce, due to the stringent COVID lockdowns.
- Major airport hubs, as well as secondary airports in Europe are reporting normal throughput on the import and export sides.
- Export capacity remains fairly tight due to continued lack of belly capacity. It can take 2-5 days from booking to uplift into key European destinations. Capacity from West Coast gateways is the most constraint to Europe, while the Midwest and East Coast are manageable. Capacity from the West Coast to Asia is filling quickly with dry-cargo perishables.
- US and European carriers have not added any meaningful capacity on their transatlantic routes and are waiting for further info on how the newly proposed E.U. travel regulations will take shape for the summer months.
- With a high number of freighter flights from Asia and Europe, LAX and ORD ground handlers are still dealing with backlogs of import freight. Ground handlers are reportedly 3-6 days behind in breaking down freight from arriving flights. In addition trucking is scarce for airport recoveries and local deliveries, especially on the West Coast.
Updates from Flexport's Customs & Compliance Team
Secretary Raimondo Concedes Possible Shift on Section 301 Tariffs
During a meeting with the Department of Commerce’s Supply Chain Competitiveness Advisory Committee, Secretary Gina Raimondo said that speculation on the Biden Administration possibly lifting Section 301 Tariffs as part of a wider shift in the US’s strategy towards China is “fair.” She promised to utilize the Department of Commerce’s powers to take meaningful trade action against China when necessary. The imposition of the Section 301 tariffs falls under the Office of the US Trade Representative (USTR)’s purview, but importers should compare Secretary Raimondo’s discourse to see if other Biden Administration officials make similar assertions in the coming weeks.
USTR Allows for Corrections on Some Section 301 Tariff Exclusions
The USTR announced that the possibility of pursuing refunds for some products exported after Section 301 List 3 tariffs increased from 10% to 25% that had not yet arrived into the United States. Goods covered by a Section 301 exclusion that left China before 10th May 2019 and entered the US before 15th June 2019 are exempt from the tariff hike. There were ten rounds of exclusions announced between August 2019 and May 2020. Importers should check to see if their goods fall under the guidelines outlined in the Federal Register Notice and contact their customs broker.
CBP Seeks Potential Increased Supply Chain Visibility
Another highlight from the Department of Commerce’s Supply Chain Competitiveness Advisory Committee saw CBP announce they are looking into ways to make admissibility easier for importers who disclose to CBP more information about their supply chains. The Director of Trade Modernization, Garrett Wright, said the changes could be a part of the 21st Century Customs Framework announced last year to modernize how CBP can “clear lawful trade more quickly.” For now, the supply chain visibility component would be an opt-in feature of the wider modernization plan. Look for more details to be announced at the end of the summer.
Economic highlights from Flexport Chief Economist Dr. Phil Levy
PMI Numbers Gain Strength Around the World Optimistic purchasing manager indices showed strength in multiple markets. US numbers showed a record level, Euro Area figures hit a 9-month high, and Japan showed expansion.
Jobless Claims Hit Recent Low The US initial unemployment insurance claims figure was 547K, the lowest since March 14, 2020.
National Debts Are on the Rise In both the US and the Euro Area, aggressive fiscal measures have pushed up debt as a share of GDP. In the US, from 2019 to 2020, debt rose from 79.2% to 100.1% of GDP. In the Euro Area, it rose from 83.9% to 98.0%. While there is nothing magical about 100% debt to GDP, it has traditionally been a threshold of concern. For the US, the levels are near WWII peaks.
US Business Exits Are Better than Expected US business failures are not as bad as feared, according to a Fed study. While official data arrives with a substantial lag, preliminary data suggest high levels of exit were concentrated in very small firms in specific industries and did not represent a large share of US employment. Looking ahead, exit expectations were below historical rates in most industries.
Learn more about economic trends affecting your business in Flexport’s weekly Economic Outlook.
Freight Market News
LNG-Fueled Ships Split Opinions on Sustainability As container lines face pressure to drastically reduce carbon emissions by 2050, some ships are turning to liquefied natural gas for fuel. But the Wall Street Journal reports some carriers and the World Bank object to its use, claiming it’s better to wait and switch directly to a non-fossil fuel than redirect resources to a transitional one.
Suez Canal Impacts Could Stretch into June Ocean capacity losses, due to carrier schedule changes, after the blockage of the Suez Canal could last until June, reports Supply Chain Dive. Experts expect two waves of impact—initial delays from vessels being pushed back and a more diffuse pattern of congestion and container availability worldwide.
Container Shipping Turns 65 On April 26, 1956, the first container ship, Ideal X, set sail from Newark, NJ, carrying 58 truck trailers. The anniversary of container shipping finds the industry in a state of extreme volatility, but, as the Journal of Commerce reports, the carriers themselves are in a strong position. After years of overcapacity, demand has turned the tides in their favor.
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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.