Market Update

Freight Market Update: July 6, 2021

Ocean and air freight rates and trends; customs and trade industry news plus Covid-19 impacts for the week of July 6, 2021.

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Ocean Freight Market Update


Asia → North America (Transpacific Eastbound)

  • Market strength continues as the summer progresses and the start of the traditional peak season looms. Port and rail container yard difficulties continue and vary in form, from excessive shutting down Seattle/Tacoma terminals for a day to chassis shortages.
  • Rates July 1 GRI implemented
  • Space Critical
  • Capacity/Equipment Critical/Severe under capacity
  • Recommendation Continue to book well in advance (at least 4 - 6 weeks) prior to targeted departure for best possible chance of hitting target departure date. Encourage suppliers to be flexible and support departures from different origin ports.

Asia → Europe (Far East Westbound)

  • 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 rolling shipments as a result. Yantian port has mostly resumed operations but is still dealing with congestion and disruption.
  • Rates Significant increase on July 1st across all carriers. Rates will move up further on July 15th.
  • Space Extremely critical space situation
  • Capacity/Equipment Severe equipment shortage across all Asia origins.
  • Recommendation Book at least 4-5 week prior CRD. Consider the limited premium options. Adopt flexibility on equipment.

Europe → North America (TAWB)

  • Leading indicators hint toward a prolonged phase of inventory restockings. April 2021 saw a deterioration in the US Retail inventory-to-sales ratio and a further record growth in US consumer spending on durable goods vs. the previous month.
  • Rates July 1 GRI implemented.
  • Space Critical
  • Capacity/Equipment Tight and guaranteed only with Premium rates. Several vessels are omitting Rotterdam due to the ongoing port congestion there. Be flexible re departures from different origin ports. New blank sailings will reduce capacity to USWC in week 29-31.
  • Recommendation Book 5 or more weeks prior to CRD. Request Premium service for higher reliability.

India → North America

  • Peak-like volume remains throughout the ISC region with no end in sight as export demand continues to grow.
  • Rates 1H July rates increased with another increase expected for 2H July.
  • Space Tight to USWC and Canada. Feeder vessel space is first come first serve and is causing some issues on shipments utilizing a transshipment port.
  • Capacity/Equipment 40HQ are challenging and as a result some carriers are charging surcharges for high cube vs standard 40ft containers. Siloed equipment at ICDs may result in additional container repositioning charges from the carrier.
  • 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 shrink capacity. The US West Coast still bears the brunt of lost capacity. Responding to congestion, some carriers have decreased the frequency of their Oakland and Seattle port calls.
  • Rates BAF levels have increased for July 1st. One carrier has announced GRI intentions for August for all dry exports to Asia.
  • Space Tight from the US West and East Coast, however EC may be opening a bit for July. A new service launching in the US Gulf will increase its capacity a good deal.
  • Capacity/Equipment Capacity tight from the US East and West Coast. Equipment and chassis are tight at most ports and all ramps.
  • Recommendation Book 4+ weeks out.

North America → Europe

  • US and Europe port congestion diminishes capacity. The diminished schedule reliability and ongoing delays continue to create void sailings with vessels so far behind.
  • Rates Steady, but with a July 1 BAF change, rate levels are seeing an uptick.
  • Space Very tight from the US West Coast. The US East Coast is being managed more tightly by a few ocean carriers due to lost space from vessel delays 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 if possible for the US West Coast.

Air Freight Market Update


Asia

  • After some June gloom, the airfreight market picked up strength during the first week of July as export volumes from China increased and rates followed suit.
  • SE Asian origins continue to see very tight capacity situations with only Taiwan easing a bit as subdued demand and increased capacity from home carrier China Airlines helped to push down rates below $10/kg for the first time in several months.
  • Fuel surcharges are increasing in many origins as crude oil reached prices not seen in years. Continued production caps from OPEC could see oil continue its upward trajectory which will keep air freight rates elevated as airlines look to capture this added expense.
  • The outlook for July is for a very strong airfreight market and higher reates so make bookings as early as possible to avoid lengthy uplift delays.

Europe

  • Similar market conditions to last week in terms of demand. Export hubs across the EU still predicted to continue with this level of demand for most of July.
  • FAA “preighter” exemption to expire on 10 July, therefore potential for reduced “preighter” capacity. However, belly hold capacity continues to be injected into the market, especially for TAWB trade lane, therefore no significant implications expected
  • Other lanes are still stable. PAX capacity may be reduced from the UK, given the increased growth of the Covid Delta Variant.
  • No congestion reported at EU hubs for import/export this week
  • Advice remains: Book early for the best rate levels. For larger shipments, be open to split across 2-3 uplifts to guarantee best options.

Americas

  • 100% screening for all Airfreight cargo for U.S. exports is in effect as of July 1st, 2021! Ground Handlers report longer lines for cargo throughput for export, as screening takes more time than anticipated. Some carriers left shipments behind to maintain flight schedule integrity.
  • Export demand steady in the 1st week of July with spillover from month and quarter end. Large consignments, mainly from the West Coast, may take 2-3 days from booking to uplift into key European destinations. Capacity from WC gateways still appears the most constrained to Central European gateways such as AMS/CDG/FRA, while the Midwest and East Coast capacity remain balanced and very manageable.
  • Space to India, Nepal, Bangladesh and Indonesia remains very constrained as aid and relief efforts reach the COVID-struck region—currently space is booked out until the middle of July.
  • LAX and ORD ground handlers still face backlogs and 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’t be tendered earlier than 2 days before actual departure of flight
  • Trucking remains scarce for airport transfers and local pickup and deliveries, especially in LAX/ORD/JFK.

Updates from Flexport's Customs & Compliance Team

Trade Promotion Authority lapses without fanfare and renewal push

On July 1, the current iteration of Trade Promotion Authority (TPA) expired, leaving free trade negotiations with the UK and Kenya with no clear path forward. With TPA, the President can negotiate new trade agreements with other countries in good faith, with those agreements subject to only an up-or-down vote in the House of Representatives and the Senate.

US and Taiwan hold first trade meeting

On June 29, Assistant US Trade Representative Terry McCartin met with his Taiwanese counterpart, one of the first top-level trade meetings between Taiwan and the US since 2016. The two sides discussed issues that could deepen cooperation potentially leading to free trade talks.

CBP issues two rules for USMCA implementation

On July 1, CBP published proposed rules for implementing several provisions of the USMCA trade agreement that would benefit importers and exporters by adopting a more standardized approach to rules of origin application. The new proposed rules also allows importers to continue NAFTA-era practices for marking, among a host of new changes.


Factory Output News

Taiwan Exports rose for 12 month in a row, despite covid outbreaks since May [Source]

Vietnam Saudi suspends flights to UAE, Ethiopia & Vietnam over worries of Covid19 Delta variant [Source]

Cambodia The country warns of going back into lockdown as Covid cases rise [Source]

Indonesia AirAsia Indonesia temporarily halts all flights for a month from July 6 onwards [Source]

Philippines COVID-19 restrictions have been extended until mid-July [Source]

India The Indian State of Haryana extended lockdown till 12th July with some relaxations after reporting 9,336 new Covid-19 cases on Saturday. No change to operations. [Source]

Pakistan, Bangladesh, Sri Lanka Emirates extends suspension for passenger flights till 15th Jul. Passengers who have travelled through these countries in the last 14 days will not be allowed to enter UAE from any point. [Source]

Freight Market News


YOY Container Prices Surge The Wall Street Journal reports the global average price to ship a 40-foot container has more than quadrupled in the space of a year, as Asia-US and Asia-Europe demand reaches staggering levels.

Read More: Whose Fault Is the Current Ocean Freight Market Crisis? Nobody’s, Really.

EU Gears Up for Heavy Imports Carriers are making plans to increase capacity to serve European ports this summer, according to the Journal of Commerce. With nearly all available industry capacity deployed already, any capacity growth into the region would likely have to be diverted from other trade lanes or via extra loaders.

Ever Given Almost Set to Sail The Ever Given, the ship that spent six days trapped in the Suez Canal, may finally make her way to Rotterdam. The Loadstar reports a settlement between the ship's owner and the Suez Canal Authority may be finalized this week.

Read More: A Salvage Master’s Life: Saving Ships, Restoring Trade, and Getting Paid

Economic highlights from Flexport Chief Economist Dr. Phil Levy

A strong US jobs report showed 850K new jobs in June, the biggest increase since August 2020 and significantly above expectations.

The job gains were heavily in private service-providing industries, with leisure and hospitality leading. The employment-population ratio—calculated from a different survey—stayed constant at 58.0%, 3.1 percentage points below its February 2020 level. The unemployment rate was 5.9%, up slightly from May.

Promising EU jobs figures for May showed unemployment decreasing by 382K with an unemployment rate of 7.3%. The unemployment drop was the largest post-pandemic.

An oil negotiation impasse blocked talks to increase production among the OPEC+ group. Following the breakdown, Brent crude rose to $77.09 per barrel, its highest since 2018.

Broad US trade measures were up in May. Exports were up 0.6%, and imports up 1.3%. Comparing cumulative goods imports for January-May, they were up 22.2% over 2020 (pandemic affected) but just 7.7% over 2019. Goods exports for that period were up 19.7% over 2020 and 0.7% over 2019.


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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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