Freight Market Update: December 14, 2021
Ocean and air freight rates and trends; customs and trade industry news plus Covid-19 impacts for the week of November 16, 2021.
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Ocean Freight Market Update
Asia → North America (TPEB)
- Capacity outlook is constrained with potential rate increases on the horizon as pre-Chinese New Year demand forecasts remain strong and additional blank sailings are announced. Recent upticks in Covid-19 cases in Zhejiang, China could pose additional complications for urgent cargo in the region. Other market challenges (congestion, delays, sliding schedules, early closure of feeder port operations) continue to be at play on TPEB.
- Rates Rate levels remain elevated due to strong pre-Lunar New Year demand; premium market also remains strong.
- Space Critical
- Capacity/Equipment Critical/Severe Undercapacity
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. Most carriers extended their rates going into December. As we will be entering the traditional pre-CNY peak season soon, we anticipate that there will likely be rate increases in January.
- 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)
- USWC remains heavily congested at both LA and LB despite improvement on the quay.
- Congestion at USEC ports is manageable at the moment. Some lines are reinstating a Savannah call from January 2022.
- Rates December rates are set to remain strong for both USEC and USWC. Rate increase announced for MED origins.
- 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
- Export demand remains strong for both USEC and USWC bound shipments. The ISC market is better suited for USEC bound cargo, as ocean carriers have deployed much more capacity on this trade vs ex-ISC to USWC.
- Rates remain steady for december. Expecting rate increases to be implemented for January.
- 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.
- Equipment is 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.
- Recommendation If routing to USWC, consider rerouting to USEC and transloading/trucking to final destination. Be prepared for delays during the upcoming peak season from January to April.
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, is creating significant challenges with posted earliest return dates and vessel cut-offs at the port.
- Rates For December, there are multiple GRIs likely to be implemented for India destinations requiring transshipment as well as GRIs for destination Australia. GRI activity for January is anticipated for select Southeast Asia and 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 will be omitting Savannah and calling Charleston or Jacksonville instead, due to the significant congestion issues at the port of Savannah.
- Rates to remain steady for December. There have been multiple GRI’s announced for January from the US East Coast and US Gulf which are likely to be implemented.
- 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
- N. China: TPEB demand and rates maintain at high levels as we get closer to the holidays. FEWB demand is also very strong in large part due to the Omicron variant and the push for Covid-related goods, causing rates to converge towards TPEB levels. This market momentum is expected to continue until Christmas and is quite unprecedented compared to previous years.
- S. China: TPEB capacity ex-South China continues to be tight and rates have increased slightly this week. Passenger flights on the FEWB trade lane have been canceled by most carriers but rates remain at the same levels as last week.
- Taiwan: The market continues to be very tight and space constrained as shippers continue to push out cargo before the holidays. Airlines once again increased rates for the TPEB trade lane and origin dwell times are averaging at least 1 to 2 weeks. Must-go service is still available on a case by case basis, subject to airlines’ capacity situations.
- SE Asia: Space ex-Northern Vietnam remains tight. Carriers have not announced flight cancellations during the holidays as demand continues to stay strong. Capacity ex-Southern Vietnam continues to be affected by heavy congestion at transit hubs. Transit times are difficult to guarantee, even with express service.
- Demand is still very high this week. Fewer ocean to air conversions, but we are still seeing last-minute cargo for inventory replenishment before Christmas.
- Still a heavy imbalance between supply vs capacity; therefore rates are at a stable high level.
- More deferred routings are cheaper and offer some stability in prices, but expectations need to be managed regarding transit times.
- Splitting cargo into still smaller batches across more uplifts is a viable solution in a congested market with limited capacity.
- Congestion is still manageable at AMS, and has improved in FRA. This weekend is expected to be busy with export cargo, but contingency plans should be in place to manage any unexpected spikes in volume for both import and export cargo.
- Advice continues for all trade lanes ex-EU: Place bookings as early as possible for most optimal rates and routing solutions.
- US export demand will remain at high levels until the last weeks of December. Larger shipments from major outbound gateways can take 2 to 4 days from booking to uplift into the EU, LATAM, or Asia.
- US authorities lifted the ban on travelers from the EU, and European Airlines are slowly introducing more bellyhold capacity. Additional capacity has also been deployed into LATAM.
- TPWB and TAEB have not experienced cancellations due to the new COVID variant.
- LAX/ORD/JFK ground handlers continue to face backlogs and are using off-airport facilities to manage the flood of inbound cargo, which has a trickle-down effect on the export side. Many have shortened their free time for storage, and have implemented new, earlier close-outs for exports to accommodate longer throughput times and screening requirements.
- Rates to Latam, Europe and Asia have seen seasonal increases, and will remain at these levels until the last weeks of December. Fuel surcharge has slightly decreased.
- Slightly higher transit times into top European hubs due to the current influx of cargo arriving to their terminals.
- Recommendation Book early considering the current dwell time at airports.
Updates from Flexport's Customs & Compliance Team
Senate Confirms CBP Commissioner Nominee
Last week, the Senate confirmed President Biden’s nominee to run US Customs and Border Protection, Chris Magnus. Commissioner Magnus previously served as Chief of the Tucson Police. With many policy priorities to balance, from immigration enforcement to ensuring a smooth flow of imports and exports across US borders, Commissioner Magnus will have much to keep him busy.
UK-US Free Trade Agreement “On Pause”
US Trade Representative Katherine Tai highlighted many achievements her agency resolved in their first year in office: the Digital Service Taxes removal, an agreement with the EU on steel and aluminum, and the end of the decades-long dispute between Airbus and Boeing. However, she pointed out that the UK-US free trade agreement negotiations have hit a standstill, as the two countries are collaborating in other trade matters, such as digital trade and forced labor. She provided no insight as to when the talks would resume.
Factory Output News
- Japan Manufacturers' index stalled due to rising raw material costs that were weighing the country's economic recovery. Non-manufacturing got a boost from the lifting of pandemic restrictions. Overall, business still lacks strength, and conditions are expected to worsen with the new Omicron variant. Source
- South Korea Exports are at an all-time high, due to strong chip and shipbuilding demand. South Korean chips remain number one in the market with 58.9% market share. 93% of global LNG green carriers are also built in South Korea. Source
- Vietnam Tax breaks to be extended beyond reopening in view of boosting sectors ravaged by the Covid-19 outbreak, positively impacting Vietnam’s export-oriented manufacturing sector. Source
- Thailand A lithium-ion battery plant opened in Thailand will be the largest production capacity in the ASEAN region, playing a crucial role in electric vehicle production. Source
- India MG Motor India plans to tap right-hand-drive countries in the global automotive market and plans to make India the export hub for neighboring markets. Source
- Pakistan Footwear sector’s domestic production has increased by 50% in the past three years and is targeted to reach $1B by 2027, mainly owing to import substitution. Source
Freight Market News
Air Cargo Demand to Remain High Entering Into 2022 According to Lloyd’s Loading List, the air cargo charter market is expected to remain strained in the coming year. Air capacity continues to get tighter, with ecommerce trends impacting demand and the Omicron variant restraining capacity. With air capacity demand far outpacing supply, The Loadstar also reports that China’s cabin cargo ban will only add pressure on air capacity.
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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.