Freight Market Update: September 7, 2021
Ocean and air freight rates and trends; customs and trade industry news plus Covid-19 impacts for the week of August 31, 2021.
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Ocean Freight Market Update
Asia → North America (TPEB)
- Capacity on TPEB remains constrained, relative to peak season demand, as shippers and importers look to pay all-time high premium prices to get urgent cargo out from origins as soon as possible. Labor strains, extreme congestion, and Covid-19 related disruptions are expected to place additional pressure on capacity as we head into the fall and winter.
- Rates September 1 GRI implemented. September 15 GRI expected.
- Space Critical
- Capacity/Equipment Critical/Severe Undercapacity
- Recommendation Continue to book well in advance (at least 4 to 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 crunches continue. Market demand exceeds supply as rates skyrocket. The 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 but are stable going into September. Rates may increase further due upcoming Golden Week blank sailings.
- Space Extremely critical space situation
- Capacity/Equipment Severe equipment shortage across all Asia origins.
- Recommendation Book at least 4 to 5 weeks prior to CRD. Consider premium options, which may be limited. Be flexible in regard to equipment.
Europe → North America (TAWB)
- Tropical storm Ida has forced New Orleans port to close due to power outage. Operations have resumed in Mobile, while slight delays should be expected in Houston. Congestion at LAX/LGB ports has worsened with up to 40 vessels in queue, with no expectation to improve in the near term.
- Rates October 1st GRI likely implemented
- Space Critical
- Capacity/Equipment Capacity remains tight. 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 guarantees.
India → North America
- Rates increases and space constraints continue to affect the Indian Subcontinent market as global supply chain challenges cause ripple effects across many trade lanes.
- Rates increased for export to both US East and West Coasts.
- Space remains a challenge as ports of loading omissions are being used as a lever to improve global schedule reliability. Covid outbreaks at key transhipment ports such as Colombo are also causing challenges.
- Equipment of all types are in deficit. Carriers are working to reposition empties while also placing large orders of new equipment.
- Recommendation Use premiums on urgent shipments and shipments with CRD approaching. If routing to USWC, consider rerouting to USEC and transload to truck.
North America → Asia
- Space continues to be tight for USWC POLs. USEC capacity has been more readily available; however, as port congestion continues to increase, there is concern of void sailings occurring due to extensive schedule delays.
- Rates Select carriers have implemented GRI’s for Sept 15 and Oct 1.
- Equipment Deficits on containers and chassis 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 4 to 6 weeks in advance to secure your ideal sailing.
North America → Europe
- There is available capacity on the TAEB trade with carriers looking for cargo from the US East and Gulf Coasts. US West Coast service to Europe is very tight.
- Rates remain steady for September.
- 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.
- Please place bookings 3 to 4 weeks in advance for East Coast/Gulf sailings and 4 to 6 weeks for Pacific Coast sailings.
Air Freight Market Update
- Shanghai / PVG: PVG airport is slowly recovering and some capacity in the market is available at higher rate levels. TPEB transit times are still expected to be extended by 3 to 5 days. For FEWB, due to flight cancellations, rates are picking up quickly and converging towards TPEB levels. Like TPEB lanes, transit times are also expected to be extended by 3 to 5 days.
- Hong Kong: The market remains tight with limited capacity and longer transit times expected. Congestion at origin may also result in delays in the booking process. Requests for project shipments are strong.
- Taiwan: The market is very tight. Due to crew quarantine issues, Evergree, the second largest carrier in the TPE market, cancelled all flights to ORD from Sept 13 to Sept 17, which will push ORD cargo to other US stations such as LAX/SFO/ATL/DFW/JFK. Because of heavy congestion and capacity constraints, some US East Coast shipments are being routed through the EU, contributing to tighter FEWB capacity. Carriers have announced rate increases ranging from 25-35% effective from Sept 10 at the earliest. FSC will also increase starting on Sept.16..
- Vietnam: For northern Vietnam, TPEB rate levels remain high and the FEWB market is stable; conditions remain similar to last week. For southern Vietnam, flight cancellations have led to critical space issues and notable rate increases for both the TPEB and FEWB lanes.
- Transatlantic trade remains steady WoW. Monday’s Labor Day holiday means we expect demand to be higher towards the end of the week as the US is back online from today. Rates are still stable. Given the increasing Covid cases in the US, we could see a strain on capacity in the coming weeks given the potential for reduced passenger aircraft travel. Airlines who are adaptable could still however move “cargo-only” PAX flights as a contingency.
- Some European carriers are still offering services from Asia to the US East Coast via European hubs (AMS/FRA/CDG), substituting for the heavy demand on the Transpacific. This is starting to put some pressure however on the FEWB lane.
- Far East eastbound cargo is still disrupted, airlines have reduced capacity on this lane, and bookings are likely to be changed at very short notice. Some PVG import embargoes are still evident, and secondary airports continue to see disruption from limited ground handling operations.
- US ground handling terminals are still experiencing delays on average of 2 days. Build in some lead time if possible to combat this issue.
- Advice continues for all trade lanes ex EU: Place bookings at least 7 days ahead of CRD for most optimal rates and routing solutions.
- 100% screening requirement for all US export airfreight is in effect as of July 1, 2021. Ground handlers are still reporting long lines for cargo throughput. Many have implemented new, earlier close outs for exports to accommodate the additional time.
- Export demand from the US remains steady and stable, while US air exports are experiencing some manageable capacity constraints. Large shipments from all major outbound gateways in the US may take 2 to 4 days from booking to uplift into key European and Asian destinations.
- Operations at the PVG airport have been partially suspended due to additional COVID-19 cases. Over 30% of flights have been cancelled. The current situation could potentially generate additional capacity constraints in other Asian hubs (HKG/ICN/TPE). Rates are increasing.
- Capacity to Australia is limited. Several carriers have reduced their weekly flights due to the country’s cap on passenger numbers.
- Capacity to Central Europe (AMS/CDG/FRA) is constrained but manageable.
- Space to India is manageable, 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 to 5 days of backlog to break down import freight. Export cargo cannot be tendered earlier than 2 days before departure as a result.
- Trucking remains scarce for airport transfers, local pickup, and deliveries across the nation, especially around major international in- and outbound hubs.
Updates from Flexport's Customs & Compliance Team
Canada to Weigh In on Auto Rules of Origin with Mexico Against the US
Canada is joining Mexico’s complaint against the US on how the US is calculating regional value content (RCV) in the auto rules of origin under USMCA. The specific dispute centers around the RCV of supercore parts. The parties will meet to resolve the dispute by September 22, 2021. If they cannot resolve the dispute, the challenging parties will probably request a panel review, with an initial report around February 20, 2022. Potentially impacted importers should watch this space for future updates.
Logistics Rewired: Preparing for the 2022 Harmonized Schedule Update Sept. 15 at 9:00 AM PT | 12:00 PM ET | 5:00 PM BST | 6:00 PM CET
Factory Output News
China Shanghai downgraded all areas to low risk for Covid-19. [Source]
Vietnam Lockdown may be lifted in Ho Chi Minh City in favor of a policy of living with the virus [Source]
Philippines Philippines lifts Covid travel ban for 10 countries [Source]
Philippines Philippines Airlines files for bankruptcy after the pandemic devastates the aviation travel industry [Source]
India India has increased its Covid-19 vaccination drives in the rural hinterland of India. Nearly 120M shots were administered in the past 3 weeks and around 70% were in Indian villages. [Source]
Bangladesh A new Bangladeshi Airline, Air Astra, is set to take to the skies starting in Jan 2022. The plan is to collect at least four aircraft and operate flights to all domestic destinations. [Source]
Pakistan UAE Air Arabia has agreed to establish a new carrier in partnership with Pakistani's Laskson Group. The new venture will be named 'fly Jinnah' and will focus on serving the domestic market before expanding its network internationally. [Source]
Freight Market News
Chinese Exports Grew in August China’s exports rose 25.6% YoY in August despite challenges brought on by Covid-19 according to The Wall Street Journal. Shipments to each of China’s major trading partners excelled—exports to the EU jumped 29.4%, Southeast Asia increased by 16.6%, and the US grew by 15.5% in August.
EU Congestion Charges Become Permanent Congestion charges on Europe’s inland waterways are set to become more permanent as the sector continues to battle disruptions, according to The Loadstar. Major carriers have announced increased rates, subject to fuel, International Maritime Organization regulations, congestion and high- or low-water surcharges.
New Truck Bookings Rise FreightWaves reports bookings for new Class 8 trucks rose to the highest level in 5 months in August as manufacturers opened 2022 order books—up 91% YoY. However, microchip shortages and supply constraints might create an inability to complete assembly of new trucks.
Economic highlights from Flexport Chief Economist Dr. Phil Levy
US jobs fall short in August. Shouldn’t 235K new jobs be a good thing? Yes, but not if expectations were for 720K. Both analysts and the Federal Reserve have been looking at a “jobs shortfall,” by which they mean the gap between the pre-Covid market and the current one. By one measure, that gap was still 7m jobs in August. At the rate just reported, that gap would take 2.5 years to close.
Other key figures in the jobs report: the unemployment rate fell to 5.2%. The employment-population ratio was little changed at 58.5% - up from 51.3% in April 2020 but down from 61.1% in February 2020.
US August manufacturing is up slightly according to the latest ISM survey. It was still in expansionary territory, though “suppliers continue to struggle” with rising commodity prices, parts shortages and logistics constraints.
China’s equivalent number fell to its lowest since February 2020, with export orders at their lowest since July 2020.
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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.