Freight Market Update: January 4, 2022
Ocean and air freight rates and trends; customs and trade industry news plus Covid-19 impacts for the week of November 16, 2021.
State of Trade: Slowdowns and Seasonality - Key Indicators to Watch in 2022
January 19 at 9:00 am PST / 11:00 am EST / 5:00 pm GMT
The health of our economy and logistics networks are intimately connected. Surging consumer demand and low inventories are still driving supply chain congestions, which in turn is driving price inflation. What’s next, when will it all end, and how will we know when that happens? Join our economics experts as we discuss the state of the global trade economy, which metrics matter most in 2022 and why seasonality matters so much.
Ocean Freight Market Update
Asia → North America (TPEB)
- Pre-Chinese New Year cargo rush pushes the ceiling for premium rates even higher, as some shippers with urgent cargo are willing to pay sky-high rates for sought-after space. Capacity and sailings are limited relative to demand, largely due to sliding schedules, accumulating delays, and blanked sailings related to severe port congestion. Rate increases were implemented for the first half of January, some of which are near the GRI levels seen over the summer.
- Rates Rate levels remain elevated and potentially large increases are expected for January due to strong pre-CNY demand; more shippers and importers are converting bookings from standard to premium.
- Space Critical
- Capacity/Equipment Critical/Severe Undercapacity
- Recommendation Book at least 4 to 5 weeks prior to CRD. Consider premium options, which may be limited.
Asia → Europe (FEWB)
- Space and equipment crunches continue as market demand consistently exceeds supply as rates stay very high for a long period. Space and equipment remain very tight due to frequent blank sailings and port omissions. Carriers are overcommitted and are limiting booking acceptance or rolling shipments. With continuous vessel delays and shifts, schedule reliability is very low and delays for pre-CNY sailings will have a significant impact into the post-CNY period.
- Rates Rates remain stable at a high level. Some carriers slightly increased their rates for the first half of January. Due to the traditional CNY peak season, we anticipate that there will be likely a rate increases for the second half of January as well.
- Space Extremely critical space situation
- Capacity/Equipment Severe equipment shortage across all Asia origins.
- Recommendation Book at least 3 to 4 weeks prior to CRD. Consider premium options, which may be limited. Be flexible in regard to equipment.
Europe → North America (TAWB)
- Schedule reliability is expected to deteriorate as winter weather batters the North Atlantic. Port omissions and changes in port rotations will continue in the mid-term.
- Congestion at USEC ports is manageable at the moment. Some services have reinstated their Savannah call as January 2022. USWC remains heavily congested at both LA and LB despite improvement on the quay.
- Rates Ocean rate levels remain stable but still extremely elevated.
- Space Critical especially to the USWC
- 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 guarantees.
Indian Subcontinent → North America
- Demand for space is increasing as we are heading into the ISC region's traditional peak from January - April. This time period is the last quarter of India’s financial calendar where we see demand rise as manufacturers look to close their books strongly to end the year.
- Rates slight increase for 1H January rates. Further GRIs are expected to be implemented in 2H.
- Space to the USWC is and will remain a challenge into 2022. Carriers are using port of loading omissions to normalize sailing schedules for the Transpacific trade. Unfortunately, this often means the ISC region is sometimes being omitted as a port of loading.
- Space to the USEC is less challenging but we are still seeing port of discharge omissions at Savannah and Charleston on some services.
- Equipment remains a challenge at smaller Indian ports in the South and South-East as well as inland container depots (ICDs). Equipment is normalized at key ports such as Nhava Sheva and Mundra.
North America → Asia
- Vessel arrivals and available capacity remain fluid for USWC POLs. USEC capacity has been more readily available; Deteriorating schedule integrity, in addition to creating void sailings and delays continues to create significant challenges with posted earliest return dates and vessel cut-offs at the port.
- Rates There have been a few GRI advisories posted for early February specific to transshipment ports as well as Oceania destinations.
- 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 equipment and vessel space.
North America → Europe
- There is available capacity on the TAEB trade from the US East and Gulf Coasts. US West Coast service to Europe is extremely tight due to void sailings caused by systematic delays. Multiple TAEB service strings continue to omit the port of Savannah and are calling Charleston or Jacksonville instead, due to the significant congestion issues at the port of Savannah.
- Rates January saw some modest increases from the US East Coast and US Gulf get implemented. No advisories for February and anticipate rate levels to remain steady through the month.
- 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 6 weeks for Pacific Coast sailings.
Air Freight Market Update
- Demand considerably calmer this week, and rate levels have decreased to all US destinations.
- There is some uncertainty regarding passenger flight cancellations throughout January, as the Omicron variant continues to cause disruption to travel. Capacity continues to be more scarce than demand, but the more deferred routings where airlines have passenger capacity is driving some stability in the high rates.
- Advice remains in place ex EU, continue to place bookings early for optimal rates and solutions. Consider smaller batches via air freight, as this is where rates and solutions can be best optimized
- US export demand has slightly softened and capacity is manageable.
- Larger shipments from major outbound gateways can take 2 to 3 days from booking to uplift into the EU, LATAM, or Asia.
- The US has experienced several flight cancellations due to Omicron, and severe weather conditions in some regions of the country
- LAX/ORD/JFK terminals have slightly reduced the inbound backlog cargo, which has a positive effect on the export side.
- Many terminals provide reduced free time for storage, and have kept the earlier close-outs for exports to accommodate throughput times and screening requirements.
- Rates to Latam have decreased but are still at higher than normal levels, while rates into Europe and Asia are stable compared to previous weeks.
- Congestion at the European hubs is improving which is slightly reducing the average dwell time at destination.
Updates from Flexport's Customs & Compliance Team
HS 2022 Updates Will Be Effective on January 27, 2022
The publication of a Presidential Proclamation in the Federal Register has confirmed the World Customs Organization Harmonized System Update to the Harmonized Tariff Schedule of the U.S. (HTSUS) will be effective on January 27, 2022. A new report from the International Trade Commission outlines the complete list of the changes and descriptions to the HTSUS.
CBP Sets Interest Rates for Duty Underpayment and Refunds
CBP has set the quarterly IRS interest rates on customs duty underpayments and refunds. For Q1, the interest rates for refunds stays at 2% for corporations and 3% for non-corporations. The interest rate for underpayments stays at 3% for both corporations and non-corporations. CBP has said the interest rates could change in Q2.
Factory Output News
- Vietnam The textile and garment industry has seemingly recovered as the workforce returns with growth in the 4th quarter allowing exports to reach pre-Covid levels Source
- Cambodia Cambodia and Hungary are preparing to hold a joint business forum to strengthen trade cooperation between them; potential matters include agriculture, food processing, and food security Source
- Indonesia The world's largest coal exporter banned exports in January as Jakarta is experiencing an energy shortage, causing growing worries of widespread blackout Source
- Bangladesh Exports hit a record high in December with $4.9bn worth of goods shipped, including sharp growth in apparel. Source
- Pakistan Exports saw significant growth of approximately 25% in the first half of the fiscal year 2021-2022 Source
- Pakistan Exports to Canada grew approximately 32% in the first 9 months of fiscal year 21-22 Source
Freight Market News
Ports Brace for Covid Disruptions Amid further waves of Covid outbreaks, the Journal of Commerce reports the ports at Los Angeles/Long Beach and Ningbo expect additional congestion. On the US West Coast, approximately two-thirds of tested longshoremen came up positive—80% of those were in Southern California. In Ningbo, no cases are reported, but a newly burgeoning bullwhip effect is packing the port with cargo.
Oakland Makes Way for Exports After years of US agricultural exporters calling for easier access to equipment and capacity, the Port of Oakland is opening space for more streamlined equipment return and encouraging exporters to take advantage of the potential availability. American Shipper reports the effort is designed to restore import-export balance to Oakland, which was more even than in other ports before Covid and other impacts.
Fuel Price Gaps Grow, Scrubber Use Doesn’t The Loadstar reports the price gap between low and high-sulphur fuel oils widened by approximately 92% in the last year, making scrubbers more economically attractive for compliance with IMO 2020 environmental regulations. Carriers aren’t retrofitting vessels as much as the spread might indicate they would, though. Capacity demand is too high to take vessels out of service.
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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.