Freight Market Update: May 3, 2022
Ocean and air freight rates and trends; customs and trade industry news plus Covid-19 impacts for the week of December 21, 2021.
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North America Freight Market Update Live | Thurs, May 5 @ 8:30 am PT / 11:30 am ET
Duty Drawback: Do You Have Money Waiting To Be Claimed? | Weds, May 11 @ 9:00 am PT / 12:00 pm ET
In this webinar, Flexport's Tim Vorderstrasse will share how companies can navigate the intricacies of the drawback process with minimal effort, tips for calculating your potential refund, and show how you can get the largest potential refund possible.
European Freight Market Update Live | Tue, May 17 @ 16:00 CEST / 15:00 BST
Ocean Freight Market Update
Asia → North America (TPEB)
- Congestion eases at coastal destination ports while Shanghai remains under lockdown due to Covid-19 outbreaks in the major manufacturing region. The lull in vessels awaiting berthing is likely to be temporary, as a spike in imports—and therefore destination congestion and associated headaches—is expected once Shanghai can resume normal production and shipping activity. In the meantime, cargo backlogs are accruing just as traditional peak season gets closer. At the same time, the current balance is such that there is more space available on the Transpacific Eastbound (TPEB) lane relative to demand than has been the case for the majority of the last two years.
- Rates: Rate levels remain elevated relative to the pre-Covid market with softening in several pockets.
- Space: Undercapacity, except in pockets.
- Capacity/Equipment: Critical/Severe Undercapacity.
- Recommendation: Book at least 2-4 weeks prior to cargo ready date (CRD). Consider premium options. Be flexible in regard to equipment and routings. Check closely with suppliers to understand any Covid-related impacts or changes to production outputs and forecasts.
Asia → Europe (FEWB)
- Disruptions continue to dominate the trade. The Shanghai lockdown and various other local restrictions across cities in East and North China are affecting factory production, warehousing, and trucking availability. On top of this the current week is affected by the extended Labor Day holidays in China. On the destination side in Europe there is impact due to congestion in several ports which is causing re-routings and further delays.
- Rates: Rates remain at a high level but have been on a downward trend since March due to a slowdown in the market. This trend looks to continue as we move into May.
- Space: The space situation is tight for Named Account Contract (NAC) but space is available for Freight All Kinds (FAK).
- Capacity/Equipment: The equipment situation is somewhat improved due to lower exports out from Asia but there are no structural changes.
- Recommendation: Book at least 2 to 3 weeks prior to CRD. Be flexible in regard to equipment. Plan on taking into account that congestion may delay cargo.
Europe → North America (TAWB)
- Congestion is showing some signs of improvement. U.S. west coast (USWC) vessel waiting time is now down to 19-21 days from 35 days a few weeks ago.
- Rates: Rates continue to increase as vessels are fully booked and capacity is still very tight with no new vessel planned to enter in the trade any time soon.
- Space: Critical for both U.S. east coast (USEC) and USWC due to ongoing congestion and strong demand.
- Capacity/Equipment: Capacity remains tight for both North Europe and Mediterranean services. Better equipment availability at port. Shortages remain at inland depots.
- Recommendation: Book 5 or more weeks prior to CRD. Request premium service for higher reliability and no-roll.
Indian Subcontinent → North America
- Equipment shortages and delayed sailing schedules continue to affect the Indian subcontinent (ISC) region. Equipment from China is coming in much more slowly due to ongoing Covid shutdowns leaving many ISC ports in a deficit. Services that use China as a transhipment location are also seeing heavy delays.
- Rates: Rates are sustained at high levels for May.
- Space: To the USWC space normalzing on some key port pairings. Space to the USEC has opened up due to ease in demand after mid-April public holidays. However, ongoing USEC congestion at main ports of discharge such as Savannah and Charleston will continue to create schedule delays in the return trips back to the ISC region. These delays often result in port of loading omissions and blank sailings.
- Capacity/Equipment: Equipment deficits are being reported across many ports in India. Most affected are the S/SE ports, Kolkata, and Inland container depots (ICDs) in North India.
- Recommendation: Load via wet port and avoid Inland container depots when possible. ICDs are a chokepoint for containers which often leads to delays in shipping order release. Booking on some premium services will give you priority on equipment.
North America → Asia
- Vessel arrivals and available capacity remain fluid for all USWC ports. The USEC continues to see challenges with vessel congestion and some vessel strings omitting Charleston and Savannah entirely. Erratic vessel schedules continue to cause significant challenges with posted earliest return dates and vessel cut-offs at the port.
- Rates: Limited general rate increase (GRI) activity announced for May.
- Capacity/Equipment: Deficits on containers and chassis continue to plague Inland Port Intermodal (IPI) origins. Availability for standard equipment at ports has not been an issue for most ports but carriers have advised of shortages on 40’s at the port of Oakland.
- Recommendation: Please place bookings 4 weeks prior to vessel Estimated Time of Departure (ETD).
North America → Europe
- Significant congestion and vessel delays in Europe still remain in addition to the ongoing schedule issues for New York, Charleston, and Savannah. This situation is now leading to bi-weekly port omissions. The port of Houston is also experiencing capacity constraints due to schedule delays and port congestion with one service being reduced from weekly to biweekly. US West Coast service to Europe is extremely tight due to void sailings and skipped ports caused by systematic delays. Pacific Northwest coverage for Europe is suspended indefinitely. All carriers have issued a booking stop for shipments to Ukraine, Russia, and Belarus.
- Rates: No GRI announced for May.
- Capacity/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.
- Recommendation: Please place bookings 3 to 4 weeks in advance for East Coast/Gulf sailings and 6 weeks for Pacific Coast sailings.
North America Vessel Dwell Times
Air Freight Market Update
- N.China: Shanghai continues to undergo lockdown due to high numbers of Covid cases. Flight capacity has increased slightly compared to last week but is still affected by a lack of demand due to lockdown measures in nearby cities. Airlines have reduced rates this week as the market outlook is expected to be slow during the long holiday.
- S. China: Ex-South China the flight frequency has still not recovered due to the Covid situation and the conflict in Ukraine. The labor holiday has led to slowed demand and decreases in rates.
- Taiwan: Demand is relatively slack compared to last week as factories just came online after the holiday. Capacity is expected to pick up at either the end of this week or the beginning of next week. Airlines have announced fuel increases starting from May 10.
- SE Asia: Demand ex-Southeast Asia is expected to be very soft this week due to the long holiday.
- Demand is steady again this week, and there is sufficient capacity in the market with the introduction of new passenger schedules.
- Rates are leveling out, and trending downward. Jet fuel pricing is still at a stable high.
- Freighter capacity remains reduced, booking to uplift window is approx 10-14 days. Build pallets below 160CM increase the possibilities of uplift sooner than on a freighter.
- Deferred routings are still providing a beneficial option if already tight lead times can take it, and at favorable rates.
- Terminal congestion is still evident at London Heathrow (LHR) due to a backlog at Dover for ferry crossings. Cargo that tranships via Europe into LHR is causing short term spikes/dips in volume for these terminals resulting in backlogs.
- For all trade lanes, continue to place bookings early to secure best uplift options/routings.
- Demand remains high, especially into Europe. Capacity remains manageable due to the additional belly capacity added in the Transatlantic trade lane.
- Origin dwell times of 3-5 days have been reported.
- Most airlines have canceled their flights into Shanghai Pudong (PVG) due to the current COVID-related lockdowns.
- Early bookings are highly recommended.
- Los Angeles, Chicago, and New York (LAX/ORD/JFK) ground-handlers are dealing with high volume considering the heavy export throughput. Rates are slightly higher into Europe and Latam compared to the previous week.
Trucking & Intermodal
- US Import/Export Trucking
- Market Trends
- Trucking capacity in major N. American markets is starting to open up as import volumes decrease across the country. The lockdowns we have seen over the past weeks across major Chinese cities like Shanghai, Guangzhou, and Beijing, will reduce even more the inbound volume US ports receive in May.
- Inland markets’ trucking capacity also remains high, driven by the lack of offered IPI bookings.
- The cartage market is beginning to soften due to the air market, and carriers are seeking volume. This softening is providing Flexport trucking an opportunity to evaluate the carriers in each market and start strategically allocating volume to carriers. The goal is to have specific partners assigned to different aspects of cartage in preparation for peak. Rather than having one carrier handle all cartage in a market, we will specify partners for airline transfers (intact vs loose) and for local pickups and deliveries.
- US Domestic Trucking
- Full Truckload (FTL) Demand continues to soften due to stocked inventories, consumer spending slowdown, recent inflation, and global conflict. Tender volumes are down 20%+ YoY in April and the market has shifted in favor of the shippers.
- Tender rejection rates have fallen to 10.43%. This reflects a 50% decrease since early March, and 60% decrease year over year (YoY).
- After peaking in early March, Diesel prices remain at record highs hovering over $5/gallon. Fuel continues to be a much more taxing operating expense for fleets both on loaded and empty miles.
- Spot market rates have plummeted by as much as 20-25% year to date (YTD), whereas Contract rates remain steady and moderately increasing. The spot market acts as a leading indicator for where rates are headed due to the transaction nature, while contract rates are not as fluid since they’re tied to longer-term agreements.
- Although conditions could change due to elevated fuel prices, supply challenges due to parts and labor shortages remained heading into May.
- Forecasting freight demand remains a challenge as COVID shutdowns in China and the conflict in Ukraine both present unknown risks to future availability and demand for certain commodities or materials.
- Market Trends
Customs and Compliance News
U.S. Trade Representative Provides Update on Section 301 Exclusions
The Office of the U.S. Trade Representative (USTR) has informed the trade community that if no company claims to have benefited from the Section 301 tariffs, the tariffs would end July 6, 2022. If companies submit requests for the tariffs’ continuation, the USTR will review the tariffs. During that review, the tariffs’ opponents will also have the opportunity to be heard.
Freight Market News
Spot Rates for Trucking Dip While Demand Remains High According to The Loadstar, the U.S. trucking industry has seen a downward trend with regards to pricing, spot rates, and tender rejections. As the contract rates remain strong, truckload spot rates have fallen as much as 15%, which particularly impacts small truckers who have a heavy dependence on the spot market.
Intermodal Strategies Fall Short for Container Transport Despite the slowing trucking sector and increasing fuel prices, intermodal traffic shows a downward trend, as reported by The Loadstar. The key issues that drove down intermodal travel in late 2021 included congested terminals, driver shortages and equipment alignment, all of which continue into 2022.
Flexport Research Updates
Weekly Economic Report: Shifting Trade Prices Recent weeks have seen the dollar strengthen significantly against major currencies. That’s a natural result of more aggressive monetary tightening by the U.S. Federal Reserve. But the effect is to make U.S. imports look cheaper while exports look more expensive.
Air Timeliness Indicator The Air Timeliness Indicator measures the amount of time taken to move airfreight along two major trade lanes from the point of consolidation to arrival at final destination. The latest indicator saw a slight increase for the Transpacific Eastbound lane (TPEB) at 11.6 days, while the Far-East Westbound lane (FEWB) rose to its highest level since the end of February, hitting 10.6 days, potentially driven by networks fully adjusting to the changes in operations required by the conflict in Ukraine.
Ocean Timeliness Indicator The Ocean Timeliness Indicator similarly measures transit time for ocean freight along the same two trade lanes. In the past week TPEB fell after a three week upward trend, moving down to 111 days, while FEWB saw another significant drop down to 106 days, though that is the result of a seasonal spike in handling times around the Lunar New Year holiday in China having affected the prior two weeks’ data.
Flexport Logistics Pressure Matrix Shows Further Easing Flexport’s Logistics Pressure Matrix (LPM) gathers 10 data points in an attempt to provide a picture of the challenges facing logistics networks from the demand side and a view of ongoing activity on US-inbound routes. In the latest update, we show how consumer confidence has jumped but that the key activity measures of port activity, shipping rates, ocean timeliness and airfreight timeliness all suggested a relaxation of pressure on logistics networks.
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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.