Market Update

Freight Market Update: May 4, 2021

Ocean and air freight rates and trends; customs and trade industry news plus Covid-19 impacts for the week of May 4, 2021.

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Live: Capacity Crisis Overwhelms Ocean and Ground as Demand Roars

Read Flexport's analysis of what bedevils ocean and trucking and how you can respond.

Ocean Freight Market Update


Asia → North America (Transpacific Eastbound)

  • Rates: Increasing in May over April
  • Space: Extremely tight
  • Capacity / Equipment: Extreme shortages in North China, Southeast Asia, and Taiwan
  • TPEB Crunch Continues: May rate-level increases are driven by two main factors. First, overall market demand is increasing, as May is primed to set another record for US imports. Second, a reduction in capacity. So far in May, blank sailings total 5-10% of weekly sailings as carriers grapple with the aftermath of the Suez canal. Furthermore, carriers note extremely strong volumes, with backlogs already pushing into June. As the prolonged peak continues, we expect May to be extremely challenging.

Asia → Europe (Far East Westbound)

  • Rates: Increased
  • GRI May 1: Significant rate increases across all carriers due to high demand and insufficient capacity
  • GRI May 15: Further increases expected
  • Capacity: Recommend advance booking notice 3 or more weeks prior to CRD.
  • We are in the middle of the ripple effects from Suez in terms of blank sailings as well severe equipment shortage. Capacity was heavily reduced in weeks 16/17 and will continue to be impacted in weeks 19/21. Equipment shortage expected to persist for the next two months due to numerous blank sailings.

Europe → North America (Transatlantic Westbound)

  • Rates: Increased
  • GRI May 1: Implemented
  • GRI June 1: Likely implemented
  • Capacity: Recommend advanced booking notice at least 5 weeks prior to CRD.
  • Notes: Rate increase announced for June by GRI and new/amended surcharges. Market expected to remain hot through the summer with increased pressure on equipment availability in the short term. Booking early is key to securing space. Use Premium products for 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: Fewer blank sailings on North Europe services but schedule reliability still hurt by the port congestion in North Europe and North America, particularly on the USWC.
  • 3 blank sailings on the EMA service in May and June will restrict capacity from East and West Med to USEC in week 20, 23, 26.

India → North America

  • GRI May 1: Implemented most carriers
  • Capacity: Blank sailings and booking restrictions are continuing to negatively affect capacity in early May. Suggested booking remains at 15-20+ days prior to Cargo Ready Date(CRD).
  • Equipment: Carriers indicate India will stay a priority (behind China of course) for repositioning empty equipment. Even so and as new equipment enters the market, increased demand and lingering effects of the Suez Canal blockage are likely to keep equipment scarce for the next two months.
  • 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.

North America → Asia

  • Rates: Increasing
  • GRI May 15: GRI notification received from two carriers.
  • GRI Jun 1: Indications received of a reefer GRI from the West Coast.
  • 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. Recommend at least 3 weeks lead time on new bookings.
  • Chassis availability is tight at most major ports and rail ramps. 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.

North America → Europe

Rates: Steady however one carrier has announced a small GRI for June 1. 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

  • Asia export market didn’t take a breather for the May Day holidays in China.
  • Demand is very strong and capacity is tight in all origins with rates continuing at peak-season highs. Overall demand from Asia to the US (TPEB) is up 44% yoy and from Asia to Europe (FEWB) up 24%. Capacity is stable but far short of what’s needed.
  • Rates in TPE have been increased a further 15-35% due to severe capacity shortages. While significant numbers of China Airlines’ crew members have tested positive for COVID, there have been no freighter cancellations so far.
  • Expect current conditions to continue at least until the end of May.

Europe

  • 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.

Americas

  • 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.
  • Perishable season kicks off the week of May 10th with expectations for a strong year US exports of fruits and veggies. Cherry season will commence the week of May 10th with high demand from Asia. During the busy perishable season rates off the west coast to Asia go up rather significantly and space is constrained but manageable.

Factory Output News

Taiwan's economy grew by 8.16% in Q1 2021 due to expansion in domestic manufacturing capacity and continued high levels of domestic investment. [source]

India recorded 392,488 new daily coronavirus cases over the weekend, sparking a discussion of further lockdowns. [source]

Pakistan is planning a lockdown in the worst-hit cities in the first week of May. Khan had resisted demands for a nationwide lockdown, citing its economic impact, but he has also warned that he will be forced to impose a lockdown if people do not stop violating social distancing rules. No change to logistics [Source: Flexport Partner]

Updates from Flexport's Customs & Compliance Team

Section 301 Tariffs Not Yet Under Review Says USTR Katherine Tai

US Trade Representative (USTR) Katherine Tai recent comments indicate that tariffs on hundreds of billions of products from China will not be removed in short order. Testifying before a US Senate Appropriations Subcommittee, she announced no “top to bottom” review has begun on the US’s trade actions on China and does not know when it will begin (1:26:50 of hyperlinked video). She said her office is in the process of completing a review of the 2020 Phase 1 agreement with China (33:26 of hyperlinked video).

CBP to Look More Closely at FTZs

CBP official Thomas Overacker said that CBP will look at how to add foreign trade zones (FTZs) into the CTPAT (Customs Trade Partnership Against Terrorism) program. Such a change would be consistent with both CBP’s actions to address e-commerce and forced labor through CTPAT and its efforts to increase its visibility into importers’ supply chains.

Office of the USTR Publishes Largely Unchanged Annual IP Report

The USTR’s annual report on intellectual property rights (IPR) maintains many of the same concerns previous reports have listed. Importers should note that this year’s report neglects to mention possible enforcement tools against countries listed on the watch lists. The United Arab Emirates was the only country who the USTR removed from the watch lists due to progress on pharmaceutical products IPR.


Economic highlights from Flexport Chief Economist Dr. Phil Levy

US Economy Expands

The US economy expanded at a 6.4% annual rate in Q1 of 2021 (a 1.6% quarterly rate). The increase was largely driven by personal consumption expenditures of goods, up a seasonally-adjusted 5.4% (quarterly rate) over Q4, with durables (9.0%) continuing to outpace nondurables (3.4%).

Europe Economy Contracts

Also in Q1, GDP for the EU fell 1.7% at a quarterly rate (-6.6% annual rate). All large EU economies saw their GDP fall except for France.

US Personal Income Jumps

US personal income jumped by 21.1% in March, following a 7.0% drop in February. The wild swings are almost entirely due to government payments.

Looking over the past 8 months, excluding those payments, personal income has averaged $14.0 trillion (annual rate), rising and falling within 0.9% of that level. Government payments averaged $4.7t, but swung from $3.7t to $8.2t.

Individuals have smoothed their consumption over these income swings, as monthly personal savings rates have ranged between 12.5% and 27.6% (March), highly correlated with government payments.

Freight Market News


Trucking Hits Equipment Roadblocks Truck fleets are struggling to keep up with US transport demand. The Wall Street Journal reports the capacity squeeze is likely to last all year and deepen with peak season. In response to backlogs, operators are increasing equipment orders, but a global semiconductor shortage limits new truck production.

Read more: Capacity Crisis Overwhelms Ocean and Ground as Demand Roars

Container Production Is Up, But Not Enough In an ongoing quest to rebalance the world’s container supply, production is up with estimates of 6 to 8% overall capacity growth this year. American Shipper reports supply will still fall short, though, because new boxes are making up for low production pre-Covid.


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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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