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Market Update

Freight Market Update: December 13, 2022

Ocean and air freight rates and trends; customs and trade industry news plus Covid-19 impacts for the week of December 13, 2022.

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Upcoming webinars:

Flexport Platform Demo | Weds, December 14 @ 12:00 pm PT / 3:00 pm ET

Logistics Rewired: Ocean Market Predictions for 2023 | Thurs, December 15 @ 9:30 am PT / 12:30 pm ET

Ocean Freight Market Update

Asia → North America (TPEB)

  • Routine blank sailings expected as carriers’ solution to excess market capacity:
    • U.S.: Transpacific Eastbound (TPEB) rates to the East and Gulf Coasts continue to soften. Carriers plan more blank sailings for Q1 2023, most notably out of Vietnam. The goal is to curb excess capacity while continuing to improve schedule reliability.
    • Canada: Market and rate conditions are similar to the U.S. Vancouver saw an improvement in waiting vessels (2 vessels), as well as improvements to berthing delays (20 days). The low TPEB demand has played a role in clearing some port and rail congestion, which is down from its peak over the summer.
  • Rates: Remain soft on most origin-destination combinations.
  • Space: Open.
  • Capacity/Equipment: Open, except in a few pockets.
  • Recommendation: Book at least 2 weeks prior to cargo ready date (CRD), and keep upcoming blank sailings in mind.

Asia → Europe (FEWB)

  • There has been a positive increase in demand and booking intake from week 48. This combined with a higher number of blank sailings in the coming period will result in tighter space in the lead-up to pre-Lunar New Year. Rates are still under pressure but not decreasing as dramatically due to a more balanced supply and demand situation.
  • Rates: There is continued pressure on rates.
  • Capacity/Equipment: Space has constricted as a result of an increased number of blank sailings and improved demand.
  • Recommendation: Allow flexibility when planning your shipments due to anticipated congestion and delays.

Europe → North America (TAWB)

  • Capacity is set to increase on average by 30% mainly due to bigger vessels entering the Northern Europe (NEUR) and Mediterranean (MED) market to the U.S. East Coast (USEC). New York and Savannah have been reinstated as weekly calls.
  • Rates: The downward trend is expected to continue into the new year. As capacity increases and demand dips into negative territory, rates are set to decrease in the months to come.
  • Space: Due to the easing of congestion, space in USEC and U.S. West Coast (USWC) is becoming more available but still not wide open as on some other trades.
  • Capacity/Equipment: Equipment availability is getting better as congestion eases up. Low empty stacks at inland depots are also getting better in some specific areas, but prioritize pick-up from the Port of Loading if possible.
  • Recommendation: Book 3-4 or more weeks prior to CRD. Request premium service for higher reliability and no-roll.

Indian Subcontinent → North America

  • Indian Subcontinent Pricing and Capacity continues to benefit shippers as rates drop and vessel space remains available.
  • Rates: dropping on most services further continuing the trend that started this past summer.
  • Space: available on all services. Carriers indicate vessels sailing at ~85% utilization or less on some services.
  • Capacity/Equipment: Capacity is available, but equipment will continue to remain an issue across the Indian Subcontinent.
  • Recommendation: Be open to procuring equipment from wet ports vs Inland container depots as equipment deficits are felt in many areas.

North America → Asia

  • Capacity, Congestion, and Equipment have all improved amid a continued drop in market demand, but rates have not fluctuated much.
  • All services to APAC have low capacity utilization levels with no space constraints.
  • Congestion has been cleared out across most North American container yards with improved operations as a result of less demand.
  • Congestion does persist in limited pockets around the Gulf and South East Coast.
  • The rail performance in a few key markets: Chicago, Dallas, and Kansas city, has also seen improvement.
  • Rates: the floating market rates are not fluctuating anywhere near as rapidly on the outbound trades as much as the inbound trades. Rates are trending slightly downwards MoM and QoQ on certain lanes from coastal ports (USEC, USWC) to Asia base ports in China, Japan, Taiwan, S. Korea. Other lanes are displaying stability in rate levels.
  • Space: open and manageable with Cargo Read Date (CRD) to Estimated Time of Departure (ETD) lead times improving from Q3 to Q4 significantly from 3-4 weeks to ~2 weeks across most lanes.
  • Capacity/Equipment: No major capacity changes in the market with very limited blank sailings as carriers prep for Lunar New Year. No major equipment hurdles to highlight in the US. Certain inland US markets in the Midwest have a balance on equipment availability while the coastal US ports have an abundance of availability.
  • Recommendation: Book 2-3 weeks prior to CRD on all coastal to Asia base port lanes, and book 3-4 weeks prior to CRD on all inland to Asia base and feeder port lanes.

North America → Europe

  • Capacity, Congestion, and Equipment have all improved amid a continued drop in market demand, but rates have not fluctuated much.
  • Most USEC to N. Europe (NEU) and Mediterranean (MED) services have low to medium capacity utilization levels with very limited space constraints.
  • Gulf Coast to NEU and MED services continue to have very high (over 100%) utilization levels as the market in Q3 and early Q4.
  • The USWC to NEU, MED services are still VERY limited in options and therefore utilization levels are artificially high. There is no positive outlook for the rest of Q4 and into Q1 for additional capacity on these lanes.
  • Rates: The floating market rates are not fluctuating anywhere near as rapidly on the Transatlantic Eastbound (TAEB) trade as they are on other global trades. Rates are trending slightly downward MoM and QoQ on certain lanes.
  • Space: Space is manageable with a slight improvement on CRD to ETD lead times from Q3 to Q4 significantly from 3-4 weeks to 2-3 weeks across most lanes.
  • Capacity/Equipment: Carriers have reintroduced port calls in Savannah and Charleston on USEC to NEU services with a return to a regular, weekly schedule which will have an impact on space and rates into Q1. Carriers on the OCEAN alliances have introduced a new Gulf service to the MED which officially launched last week. There is no outlook for carriers to add capacity OR remove capacity on the WC to NEU, MED services. No major equipment hurdles to highlight in the US. Certain inland US markets in the Midwest have a balance on equipment availability while the coastal US ports have an abundance of availability.
  • Recommendation: Book 2-3 weeks prior to CRD on all EC to NEU, MED lanes, book 3-4 weeks prior to CRD on all Gulf to NEU, MED lanes, book 4-5 weeks prior to CRD for all PSW to NEU lanes.

North America Vessel Dwell Times

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Air Freight Market Update

Asia

  • N. China: TPEB demand in the market is on the rise, and that trend is expected to continue through the Christmas holiday. Rates have also increased compared to the week prior. Far East Westbound (FEWB) demand and rates remain stable.
  • S. China: The market is picking up and space is starting to become congested. We recommend placing bookings earlier in order to arrange quicker uplift. Both TPEB and FEWB rate levels have increased in response to the higher demand. Due to heavy snowstorms in Alaska, some freighter capacity has been canceled. The Chinese government recently announced an ease in Covid restrictions so cross-border traffic is expected to gradually resume.
  • Taiwan: The market is normal with the exception of Los Angeles (LAX) capacity, which is still seeing space constraints. Carriers announced fuel decreases to 49TWD for long-haul flights, effective from 12/16.
  • Korea: There is a small peak in demand to USWC before the winter holidays, however overall the market remains soft.
  • SE Asia: The overall export markets in Southeast Asia continue to be soft. There is a trend of volumes switching back to ocean freight as reliability and rates stabilize, with clients opting to use air freight for more urgent requests.

Europe

  • Demand out of Europe has picked up slightly, with spikes into main North American hubs.
  • Capacity for standard general cargo into main hubs is tighter due to high demand for express services, driving rates upwards.
  • Terminal congestion in Amsterdam (AMS) and London Heathrow (LHR) due to staff shortages, strikes, and software issues are expected to cause delays.
  • Place bookings as early as possible to secure space as capacity becomes limited leading up to the holiday season.

Americas

  • Export demand remains steady from all markets.
  • US airports are running at a normal pace.
  • Capacity is opening up further, especially into Europe.
  • Rates remain stable week over week.

Trucking & Intermodal

Europe

  • Due to inflation/soaring costs to operate trucking/barge/rail the GRI for 2023 is expected to be around 10-15% (excluding fuel surcharge). Dropping volumes will not affect this, as this is based on cost to operate and truck carriers barely have any margins.
  • Capacity is still fragile despite declining container volumes caused by a continuous shortage of drivers and delayed delivery of newly ordered trucks.
  • There is an increase of trucking carriers looking into alternative fuels (HVO, electric and hydrogen) to decrease CO2 footprint.

Americas

Import/Export Market Trends

  • Congestion continues at Canadian ports and rail ramps. Yard utilization at Vancouver remains high; this congestion is partially due to ongoing congestion in Toronto and Montreal.
  • Memphis, Dallas, and Chicago continue to see excessive rail dwell times and congestion, > 14 days.
  • Savannah, Houston, and Oakland are seeing increased congestion, vessel bunching, and multiple vessels at anchor.
  • Highway Diesel have dropped month over month across the board.
    • East Coast ($5.336/gallon), Midwest ($5.108/gallon), and Gulf coast ($4.699/gallon)
    • West Coast ($5.666/gallon), California ($6.006/gallon), and Rocky Mountain ($5.392/gallon)
    • British Columbia, Quebec, and Ontario $5.875/gallon (~$7.980 CAD/gallon)

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US Domestic Trucking Market Trends

  • Truckload demand remains strong despite the headline-grabbing talks of a freight recession. All reputable and representative truckload demand indicators point to volumes being up year-over-year, not down.
  • Dry van capacity tightened slightly as expected, although the number of carriers posting their equipment in search of loads is now 24% higher than last year, a sign that spot market capacity remains oversupplied as we passed the Thanksgiving peak.
  • The national average linehaul rate of $1.77/mile is $0.28/mile lower than the top 50 dry van lanes based on the volume of loads moved, which averaged $2.05/mile last week.
  • Spot truckload rates have fallen more than 40% since a January high.

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Customs and Compliance News

EU to Ban Imports Linked to Deforestation

On December 6, the European Union announced it has agreed on new legislation that will ban the import of products linked to deforestation. The law will require all relevant companies to conduct strict due diligence for imports and exports of commodities including palm oil, cattle, soy, coffee, cocoa, timber, and rubber—as well as derived products (such as beef, furniture, or chocolate). Once the Regulation enters into force, operators and traders will have 18 months to implement the new rules.

Report Cites New UFLPA Enforcement Statistics

The Dispatch reported on December 6 that, according to a CBP spokesperson, the agency has stopped roughly 2,200 shipments (valued at more than $728 million) under the Uyghur Forced Labor Prevention Act (UFLPA) since June, of which more than 300 have been released. Detained shipments reportedly include chemical products, agricultural goods, textiles and apparel, household goods, and solar panels.

CBP Announces New UFLPA Resources

At the December 7 Quarterly Meeting of the Commercial Customs Operations Advisory Committee (COAC), CBP Acting Commissioner Troy Miller confirmed the anticipated launch of new resources on its website to support the trade industry’s efforts to comply with UFLPA. The resources will include new FAQs, a chatbot to guide users to relevant information, and an “interactive tool” for forced labor enforcement statistics that will include the total number and value of entries targeted for forced labor, with statistical breakdowns by industry. In addition, the agency plans to hold a “forced labor technical expo” in the spring of 2023, showcasing technology platforms and industry tools related to UFLPA compliance.

Freight Market News

California Long Ruled U.S. Shipping. Importers Are Drifting East

According to the Wall Street Journal, companies across many industries are rethinking where they ship goods after years of relying heavily on the western U.S. as an entry point, betting that ports in the East and the South can save them time and money while reducing risk. Their reasons range from the threat of a dockworkers strike along the West Coast and a repeat of the bottlenecks that roiled supply chains early in the pandemic to a reduced production dependence on China and the need to get products to all parts of the country faster. The percent of all U.S. containerized cargo handled by the Port of Los Angeles and Long Beach fell through the first 10 months of the year to a combined 25% as measured by weight, according to census data analyzed by Jason Miller.

As supply chains unclog, consumers enjoy (tentative) relief

According to the AP, the supply backlogs of the past two years—and the delays, shortages and insane prices that came with them—have improved dramatically since summer. “If you ask how long it takes to move stuff, there has been a notable improvement. If you measure it by how long would it take to get a cargo from Asia to a destination port, dramatically better,” said Phil Levy, chief economist at Flexport. The easing of supply bottlenecks has begun to provide some relief from the inflation that this year reached a four-decade peak, pummeling consumers and businesses alike.

Flexport Research Updates

Weekly Economic Report: Import Volatility

The latest US international trade numbers from the Bureau of Economic Analysis (BEA) showed that exports of goods fell from $162.4bn in September to $158.4bn in October, and imports of goods rose over the same period from $266.7bn to $271.0bn. Why are we seeing these differing patterns in imports and exports of goods? It’s an open question, no single reason leaps out. US imports are driven by the strength of the domestic economy, while exports are dependent on demand from abroad, so the relative strength of the US economy versus the struggling global economy could help explain the current patterns.

A quick reminder: the weekly economic report is now its own newsletter! You can sign up here to have these insights delivered directly to your inbox each week.

Air Timeliness Indicator: TPEB ↑ @ 8.9 days, FEWB ↑ @ 10.7 days.

Ocean Timeliness Indicator: TPEB ↓ @ 69 days, FEWB ↓ @ 75 days.

Freight Market Update is a complimentary service from Flexport, the modern freight forwarder. If you're not already a subscriber, we invite you to subscribe here.

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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