Freight Market Update: April 19, 2022
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)
- Shanghai remains under lockdown as the result of spikes in Covid-19 cases over the Easter holiday. Overall, demand on the TPEB trade remains lower than during the prolonged peak season, with exceptions in a few pockets. Ocean carriers continue to assess impacts to bookings and welcome bookings for cargo originating from Southeast Asia due to current constraints and dips in shipment activity ex-China. Severe congestion, equipment imbalances, sliding vessel schedules, port omissions, blank sailings, and increased fuel charges continue to create challenges.
- Rates: Rate levels remain elevated relative to pre-Covid market with softening in several pockets.
- Space: Undercapacity, except in pockets
- Capacity/Equipment: Critical/Severe Undercapacity
- Recommendation: Book at least 3-4 weeks prior to 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 route. COVID cases in China are causing many disruptions on the Asia side. Especially the situation in Shanghai with local lockdowns remaining uncertain. For example, re-opened factories cannot start production due to missing raw materials.
The European side is influenced majorly by congestion in the arrival ports, which results in re-routing and further delays of incoming vessels.
- Rates: Remain at a high level. The downward trend remains to be slow due to the uncertainty in the market.
- Space: Open for FAK cargo due to the uncertainty.
- Equipment: Availability improved due to lower exports, but there are no structural changes.
- Recommendation: Book at least 2 to 3 weeks before CRD. Plan with congestion that may delay your cargo.
Europe → North America (TAWB)
- Congestion at USWC is improving with vessel waiting time decreasing to around 20 days only. USEC congestion is still critical, especially in Charleston.
- Rates: remain on the high side and are expected to continue on this trend for the whole of Q2 an longer.
- Space: Critical for both USEC and USWC due to ongoing congestion.
- Capacity/Equipment: Capacity remains tight for both North Europe and Mediterranean services even though a few new services out of NEUR have been announced. 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
- Ongoing political uncertainty and Covid related delays continue to affect the ISC region. Rising political tensions in Sri Lanka and Pakistan are causing concern for local shippers. Sri Lanka has implemented measures to ration fuel which is having a direct impact on heavy equipment and trucking capacity. Local rate increases and delays are to be expected. Ongoing Covid-19 shutdowns in China will negatively impact empty equipment supply in the ISC region, as China remains a key source for equipment repositioning.
- Rates: Sustained at high levels for 2H April.
- Space: To the USWC will remain a challenge for 2022. Port omissions on services to the USWC continue to cut capacity out of the Indian sub-continent. 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.
- Equipment: Deficits are being reported across many ports in India. Most affected are the S/SE ports, Kolkata, and Inland container depots 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 SO 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 situation sees Savannah operations improving however Charleston continues to be congested and subject to omissions on certain strings. Erratic vessel schedules continue to create void sailings and delays in schedules creating significant challenges with posted earliest return dates and vessel cut-offs at the port.
- Rates: Limited GRI activity announced for late April and early May.
- Equipment: Deficits on containers and chassis continue to plague IPI origins. Availability for standard equipment at ports has not been an issue for most ports but there have been shortages on 40’s at the port of Oakland.
- Recommendation: Please place bookings 4 weeks prior to vessel 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 that are 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 and Oakland call is erratic.
All carriers have issued a booking stop for shipments to Ukraine, Russia, and Belarus.
- Rates: No GRI announced for May as of yet.
- 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 see over 20,000 Covid cases reported daily. The local government has set a target to stop the spread of the virus outside of quarantined areas by Wednesday, allowing the city to further ease its lockdown amid the public’s frustration. Nearby cities such as Suzhou, Wuxi, Kunshan, etc. are still in partial or full lockdown with very limited trucking capacity available. The central government is also assisting companies in key industries resume production with the goal of stabilizing China’s supply chains during virus outbreaks. This will take some time to implement as a shortage of raw materials also presents a challenge in resuming production and trucking capacity is still limited. Flight capacity continues to be greatly reduced during this period and ad-hoc cancellation is expected if demand is low. Market rates maintain at relatively high levels due to the ongoing supply chain disruptions.
- S. China: Ex-Hong Kong flight frequency has still not recovered due to the Covid situation and war conflict, however, demand is improving since lockdown measures were lifted in Shenzhen. Cross-border trucking capacity is still very limited (around 20% of the original capacity). Ex-Shenzhen market demand is improving but is highly affected by cross-border trucking capacity. Some shipments from Shanghai are also being re-routed to Shenzhen and air freight rates have increased compared to the week prior.
- Taiwan: The market is fairly stable this week. Another fuel increase went into effect starting from 4/16. Covid cases have been increasing significantly since week 15, however capacity and air operations remain normal. Some factories have seen outbreaks of Covid and are reducing production operations due to quarantine measures. As we approach the end of the month we typically see a short peak before the Labor Day Holiday, but due to the current Covid situation the market conditions for the second half of April remain uncertain.
- Korea: The TPEB market is strong ex-Korea as demand is high to both the US west and east coasts. The FEWB market remains relatively stable.
- SE Asia: Demand ex-Thailand is soft after the long holiday and capacity is open. The market ex-Malaysia is also soft as a result of Ramadan, the recent Songkran Festival holiday in Thailand, and the ongoing lockdowns in China. FEWB capacity has increased as Malaysia opened its borders this month. Demand ex-Vietnam continues to be weak, especially for ex-SGN where rates have dropped slightly.
- The upcoming season change means that we are seeing higher demand this week an increase in air freight requests for inventory to be stocked for Summer. Advice still remains that smaller batches in multiple shipments could be a viable solution for inventory to be restocked in a timely manner.
- Market is at a stable high in terms of rates. Drivers of the slight increases we see this week comes from fuel surcharge increases from the still record high jet fuel prices.
- Freighter capacity is heavily reduced and booking to uplift window is approx 10-14 days. This is expected to continue through the end of April.
Deferred routings are still providing a viable routing option if already tight lead times can take it. We also see cheaper options on the market to secondary hubs where airlines have regular passenger flights.
- Less congestion at EU terminals, though high volumes, therefore a potential increased transit time.
- Demand remains high, but manageable.Origin dwell times of 3-5 days have been reported.
- Most airlines have cancelled their flights into PVG due to the current COVID-related lockdown.
- Early bookings are highly suggested.
LAX/ORD/JFK ground-handlers are dealing with high volume considering the heavy export throughput.
- Most terminals provide reduced free time for storage and have earlier close-outs for exports to accommodate throughput times and screening requirements.
- Rates remain stable compared to the previous week.
Trucking & Intermodal
- US Domestic Trucking
- Demand is dropping, creating more capacity for the first time in quite a while. The Outbound Tender Volume Index has fallen below 14,000 to 13,783, and the Outbound Tender Rejection index has fallen to 16.10%. There are less tenders and providers are accepting more of their contracted freight.
- The National DAT Load-to-Truck ratio has dropped to (4.44 loads per 1 truck), which represents the lowest LTT ratio that we have seen since January of 2021. While low, it is still nowhere near a balanced market, as a balanced market is represented by a LTT ratio closer to (2.5 to 1).
- It remains a possibility that the market we are seeing is a return to seasonality, albeit a slightly delayed return that was impacted by severe winter weather and Omicron in January and February. And truly, the answer could be both, we could be seeing the market drop off as consumer spending patterns change. A highly fragmented carrier market remains which is highly susceptible to market-induced capacity swings.
- The South East and Houston, TX markets are thought to be stronger than their surrounding market, particularly when the South East hits produce season in Mid-April/May Produce Season will cause a capacity crunch in these areas for dry van and especially reefer freight, causing spot rates to rise.
- The Midwest is cooling rapidly. Chicago is falling below equilibrium at (1.58 to 1), Detroit (2.16), and Milwaukee, WI (2.44) also fell below equilibrium, and as a by-product, we should see spot rates accelerate their decline out of these markets. The North East cooled, with Elizabeth, NJ (4.56), Philadelphia, PA (3.46), Harrisburg, PA (4.20), and Baltimore, MD (4.24) continuing to inch down.
- Plenty of markets increased as we continue to see some seasonality as Norfolk, VA (port market) hit 8.52 to 1, Miami, FL (port market) 6.56 to 1, Jacksonville, FL (port market) 8.24 to 1, and Los Angeles, CA moved back up to 6.24 to 1.
- US Import/Export Trucking
- Market Trends
- Congestion continues across the majority of East Coast ports, however, some markets in recent weeks have seen a slowdown in inbound container volumes.
- Limited warehouse receiving capacity continues to be an issue as inventory levels increase. Backlogged containers waiting to unload absorb valuable chassis equipment and yard space, which in turn disrupts trucking productivity.
- Port of LA/LB approved a clean truck fee to be assessed on cargo owners beginning April 1, 2022. The plan is designed to expedite the introduction of zero-emission vehicles in the port complex.
- The fee is $10 per TEU, or $20 for all containers longer than 20'
- Profits raised from the fee will be used in part to provide direct grants to truckers for zero-emission vehicles.
- Both new and existing cartage providers have doubled down on their air export service. Same-day pickups are consistently achieved in each of our major markets. We continue to build out the linehaul service to support expedited movement on the backhaul to our major gateways.
- Market Trends
- Q2 2022 Outlook
- Volatility in FSC is expected to continue as Diesel prices remain unstable and on the raise.
Customs and Compliance News
CBP Pushes New Updates in HTSUS related to Section 301 Exclusions
CBP announced updates to the HTSUS related to the US Trade Representative’s reinstatement of 352 exclusions. CBP also announced that the exclusion subheading, 9903.88.67, would be available for 8536.50.9065 starting on April 17, 2022. 9903.88.67 became available for filing on remaining HTS codes starting on April 12, 2022.
Factory Output News
- Vietnam new vehicle sales up by 19% in March Source
- Cambodia Council for the Development (CDC) has approved final registration certificates to four non-garment projects totalling $32 million Source
- Thailand export forecast to expand by 5% in 2022 Source
- Indonesia has shifted its focus to develop downstream activities which involves converting raw materials to finished goods instead of exporting the raw materials Source
- Philippines government is seeking EOI from interested parties to construct a renewable energy manufacturing zone Source
Freight Market News
As Shanghai Lockdown Persists, Cargo Backlog and Congestion Builds
According to FreightWaves, Shanghai’s lockdown continues to impact supply chains both in China and globally. While the Shanghai port remains operational, the severe shortage of trucking capacity has led to this increased cargo backlog. As the number of cargo vessels waiting to load increases at the Port of Shanghai, diversion of ships is leading to congestion at other Chinese ports.
Concern Grows Over Increasing West Coast Container Dwell Times
According to The Loadstar, the increasing container dwell times at Los Angeles and Long Beach have prompted US Secretary of Transportation Pete Buttigieg to call on railways to address delays. At Long Beach, the average box dwell time is at 9 days, up from 3.5 in January, largely due to a lack of rail equipment and shortage of worker capacity.
Flexport Research Updates
Uphill Struggle, Downhill Stretch - Trucking’s Price Paradox
The cost of trucking has hit a record yet there are concerns in the industry about the future. What’s led to the higher prices? Why might they fall? Is this a leading indicator for logistics more broadly? This report looks at a series of open source indicators for the trucking sector and finds a downturn could be nigh.
Economic Insights: Downgrade Week
While Chinese imports have looked reasonably healthy in dollar terms, volume declines tell a different story. The diminished demand for key inputs, when coupled with Covid lockdown challenges and new official policy pronouncements, portend challenging economic times ahead.
Post Covid Indicator
Flexport’s Post covid indicator, which measures the balance between U.S. consumers’ spending on goods versus services, indicated that there is little sign of a return to pre-pandemic balance between demand for goods and services. The latest data indicates that total consumer preferences for spending on goods will remain at current, elevated levels through to May 2022 on a nominal basis. Yet, adjusting for inflation shows that preferences for durable goods are already back to summer 2020 levels and nondurables lower than that. Both are still nonetheless well above pre-pandemic patterns of spending.
Trade Activity Forecast
Flexport’s Trade Activity Forecast augments traditional economic techniques for predicting U.S. merchandise imports with Flexport’s proprietary data. U.S. merchandise imports are expected to reach a record high in Q2 ’22, reflecting higher commodity prices.
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. Last week delays increased along both the Transpacific Eastbound (TPEB) and Far-East Westbound lane (FEWB) lanes, going to 11.3 and 10.3 days respectively for the 4 weeks leading up to 4/18
Both face disruptions from the resurgence of COVID-19 and the related lockdowns in China. While the airports in Shanghai remain open, factory and trucking operations have slowed significantly so some care is needed in interpreting the figures in the next few weeks.
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 increased for a second week to 111 days, while FEWB dipped from its record high to 118 days. Both lanes saw decreases in delays for the first stage of their journeys. A combination of factory closures in Shenzhen and Shanghai combined with ports remaining open may be resulting in a degree of debottlenecking, but it should also be noted that there is some seasonality, with the Stage 1 index typically rising in the first few weeks of the year.
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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.