Freight Market Update: July 27, 2021
Ocean and air freight rates and trends; customs and trade industry news plus Covid-19 impacts for the week of July 27, 2021.
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Ocean Freight Market Update
Asia → North America (TPEB)
- Peak season set to begin in a constrained market that’s expected to persist or tighten further as pre-holiday demand increases and heavy congestion hits both coastal ports and inland hubs. In anticipation, carriers are charging port-congestion and demand-surge fees, while limiting intermodal bookings.
- Rates August 1 GRI implemented, September 1 PSS expected
- Space Critical
- Capacity/Equipment Critical/Severe under capacity
- Recommendation Continue to book well in advance (at least 4-6 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 crunch continues. Market demand exceeds supply as rates skyrocket. 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 a marginal increase on August 1. This is also reflected in the continued increase of the SCFI (Shanghai Container Freight Index)
- Space Extremely critical space situation
- Capacity/Equipment Severe equipment shortage across all Asia origins.
- Recommendation Book at least 4-5 weeks prior CRD. Consider the limited premium options. Adopt flexibility on equipment.
Europe → North America (TAWB)
- Congestion in North America West Coast worsens as import volumes surge again. Ongoing rail congestion across the country shows no sign of easing.
- Rates Aug 1 GRI likely implemented.
- Space Critical
- Capacity/Equipment Tight and guaranteed only with Premium rates. Several port omissions in North Europe as carriers try to avoid congested ports to bring their schedules back in order. No blank sailings announced so far after week 32.
- Recommendation Book 5 or more weeks prior to CRD. Request Premium service for higher reliability.
India → North America
- Rates are high and available space is low as we see carriers omit the ISC region on key services to the US East and West coasts.
- Rates Expecting increases similar to TPEB for the first half of August.
- Space is critical to USWC from all ports of loading in the ISC region. Carriers are omitting the region in an effort to re-align schedules that have been thrown off due to congestion at ports around the world.
- Capacity/Equipment equipment issues back in headlines out of the region. Carriers are reporting critical levels in Southern India and some Inland Container Depots.
- 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.
North America → Asia
- Vessel delays and void sailings continue to diminish West Coast capacity. The US West Coast continues to see delays in LA while both Oakland and Seattle have experienced increasing schedule delays and bunched-up sailings in recent weeks.
- Rates One carrier has announced GRI intentions for August for all dry exports to Asia. Multiple carriers implementing significant increases for Australia and New Zealand destination rates.
- Space Tight from the US West Coast. The US East Coast is showing signs of improvement in available space. In the US Gulf, space has increased with capacity more readily available.
- Capacity/Equipment Capacity tightest from the US West Coast. Equipment and chassis are tight at most ports and all ramps.
- Recommendation Book 4+ weeks out.
North America → Europe
- US to Europe capacity in transition Delays in the ocean network linger as a major alliance redesigns their vessel network, creating gaps in coverage as vessels are reassigned.
- Rates Steady.
- Space Very tight from the US West Coast. The US East Coast is being managed more tightly by a few ocean carriers but with proper lead time procuring capacity is more manageable.
- Capacity/Equipment Containers at US EC ports are available but certain rail ramps are tight. Chassis very tight at both ports and rail ramps.
- Recommendation Recommend 4+ weeks lead time on bookings from the US East Coast and 5 to 6+ weeks for the US West Coast.
Air Freight Market Update
- PVG TPEB market rate grows a bit partly due to the impact from Typhoon In-Fa. Remaining lanes and other major origins like HKG, TPE see market rates at similar levels to last week.
- Market conditions in the rest of Asia vary from country to country and even city to city. Two countries are prime examples. In Vietnam, HAN space is tight because of Samsung, while SGN remains in lockdown. In India, MAA is in lockdown while DEL has resumed manufacturing.
- Outlook is for a very strong end to the year as normal airfreight demand will be supplemented with ocean to air conversions. Capacity is almost fully deployed so rates and transit times will continue to increase.
- Volume stays steady from Europe. With the US being fully open, retail commodities are driving the regular volume on the transatlantic. Still we do see larger projects/stock transfers on the market, stemming from the ongoing ocean port congestion
- Direct routings to US hubs are busy. With PAX capacity now reaching other smaller hubs, road feeder service for the final leg can offer economical solutions when transit times are flexible.
- Turkey is back online after their holiday. Demand so far is manageable, no significant increase yet.
- Slight backlog of cargo in Portugal from last week due to strikes at the main airports, even as the situation stabilizes.
- Into LATAM, capacity is still more strained than into the US. Higher proportion of freighters than PAX capacity
- Congestion at terminals for import at AMS, handlers are taking longer to breakdown cargo due to staff shortages and higher volume. Export congestion remains manageable. Other hubs/terminals report high but manageable volumes.
- Advice continues: early bookings and flexibility can offer innovative solutions for import/export into EU.
- 100% screening for all airfreight cargo for U.S. exports is in effect as of July 1st, 2021! Ground Handlers, now almost 4 weeks into the new requirement, still report long lines for cargo throughput. Many have implemented new, earlier close outs for exports to accommodate for the additional time and are still finding the right rhythm.
- Export demand from the U.S. remains very steady and stable while no meaningful capacity is added. Large shipments, from all major outbound gateways in the U.S., may take 2-3 days from booking to uplift into key European 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 is very 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 2-5 days of backlog to break down import freight. Export cargo can not be tendered earlier than 2 days before departure as a result.
- 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
US Trade Representative Declines To Impose Tariffs on Vietnamese goods
Following the US Department of the Treasury and the State Bank of Vietnam’s agreement on Vietnam’s currency policies, the US Trade Representative confirmed the agency would not impose Section 301 tariffs on goods of Vietnamese origin. Her determination closes out the agency’s investigation on whether to impose Section 301 tariffs.
CBP Statistics Indict Increased Enforcement and Duty Collection
A look at CBP’s website shows the amount of Section 301 duty collection on goods of Chinese origin since September 2018 is reaching $100 billion. Also of note is the increased amount of assessments for liquidated damages, seizures, and revenue collected from audits compared to previous years, highlighting CBP’s efforts to increase enforcement across a host of policy areas.
US and Mexico Fail to Reach Agreement on Auto Rules of Origin
Mexico, which has Canadian support, and the US failed to reach an agreement on the regional content value for core auto parts. The Mexican Economy Minister neglected to say if Mexico would seek a dispute settlement panel, but Mexico and Canada’s rhetoric indicate frustration with the US’s strict interpretation of USMCA.
Factory Output News
China Hong Kong manufacturers very concerned about shipping delays. Apart from the current ocean capacity crunch and skyrocketing price, shipment delays and blank sailing ex-HKG are tying up millions in cash flow. Hong Kong port handled 1.48M TEU in June, down 3.1% YoY, however, in the first half of the year, total volume 8.7M TEU, up 1.3% YoY. [source]
Taiwan has lowered lockdown to level 2, allowing some reopening measures. Vaccination continues to be the top priority. [Source]
South Korea reports highest daily increase in COVID-19 cases on Jul 21 [Source]
Japan Japan's exports jump on solid U.S., China demand. Exports rose 48.6% in June from a year earlier, the fourth consecutive month of double-digit gains. [Source]
Vietnam USA determines no tariff action against Vietnam over currency practices [Source]
Malaysia The national state of emergency in Malaysia will end on Aug 1. [Source]
Singapore Singapore’s manufacturing production in June increased by 27.5% compared to last year. [Source]
Philippines Children in the Philippines are sent back into lockdown due to the Delta variant virus. [Source]
India Heavy rainfall in India western coast has caused flooding and landslides. Some 230,000 people were evacuated across the states amid the torrid conditions.[Source]
Bangladesh Bangladesh entered into a new 14 days lockdown on friday after easing the lockdown for the Eid-ul-Azha festival. [Source]
Pakistan Emirates have extended the suspension of passenger flights from Sri Lanka till 28th July from the initial 14th April. [Source]
Pakistan Pakistan bans unvaccinated people from flying domestically starting Aug 1st after Covid cases cross the 1M mark. [Source]
Freight Market News
Delta Stalls SE Asia Supply Chains The Delta variant of Covid has spread in Ho Chi Minh City, Vietnam, causing factories to shutter or comply with quarantine-style work conditions. FreightWaves reports factories there can only stay open if they can house and feed workers collectively in a pod. Malaysia is facing similar challenges as the nation remains under lockdown. Order backlogs in both countries could take months to clear.
Congestion Bottlenecks the US Midwest After months of watching coastal port congestion, inland truck and rail operators surrounding Chicago are under duress. With all freight rail companies stopping in Chicago, switching from rail to truck might seem like an option, but transloading may just worsen delays, according to the Wall Street Journal. Instead, cargo is being diverted to other Midwestern hubs.
Rail Demurrage Comes Under Scrutiny, Too The US Surface Transportation Board is requesting the seven Class I railroads explain their policies and practices around demurrage fees. The Journal of Commerce reports the agency is not bulking up regulations yet, but the move comes on the heels of the Federal Maritime Commission auditing ocean carriers’ detention and demurrage records under a new executive order.
Economic highlights from Flexport Chief Economist Dr. Phil Levy
Purchasing manager indices from IHS Markit showed mixed economic conditions globally. Composites for the US and UK hit 4-month lows, while the Euro zone hit a 21 year high. Japan showed a modest decline.
European consumer confidence dipped in July, but remained above its pre-Covid levels.
Japanese June exports surge, up 48.6% overall from a year earlier. Exports to the United States were up 86% from June 2020, driven by cars and computer parts. Imports were up 32.7%.
US unemployment insurance initial claims rose to 419K, their highest level in two months.
N. American auto argument unresolved. Perhaps the most salient change in the move from NAFTA to the USMCA came through stricter rules of origin on autos. The N. American content requirement rose from 62.5% to 75% if countries wanted to avoid the US 2.5% tariff. Talks this week failed to resolve a disagreement about how those percentages are calculated. When rules of origin requirements are too onerous, countries can ignore them and pay the tariffs, rendering the detailed auto rules meaningless.
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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.