Freight Market Update: January 31, 2023
Ocean and air freight rates and trends; customs and trade industry news plus Covid-19 impacts for the week of January 31, 2023.
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Ocean Freight Market Update
Asia → North America (TPEB)
- Transpacific Eastbound (TPEB) capacity is on the rise.
- U.S.: While rates remain relatively flat coming out of the Lunar New Year (LNY) week, capacity will continue to increase over the next few weeks. Expect an increase in blank sailings.
- Canada: Market and rate conditions are similar to the U.S. Vancouver continues to see stable vessel dwell counts (3 vessels) as well as berthing delays (9 days, 10 days for rail dwell).
- Rates: Remain soft on most origin-destination combinations.
- Space: Open.
- Capacity/Equipment: Open.
- Recommendation: Book at least 2 weeks prior to cargo ready date (CRD), and keep upcoming blank sailings in mind.
Asia → Europe (FEWB)
- Space has eased after LNY and the coming weeks will reflect a considerable drop in volume levels as China resumes work this week. Rates are moving downwards again due to low demand post-LNY.
- Rates: Generally reduced or extended for the first half of February.
- Capacity/Equipment: High post-LNY blank sailings in weeks 6/7/8 to adjust for the decrease in demand.
- Recommendation: Allow flexibility when planning your shipments due to anticipated congestion and delays.
Europe → North America (TAWB)
- Up until now, the number of blank sailings in the trade has been minimal despite lower demand. Capacity is still set to increase in the weeks to come as MSC and Maersk are adding more vessels in the Mediterranean loops.
- Rates: The downward trend continues and is set to last for the coming months as demand is not picking up at the same pace as 2022.
- Space: Due to the easing of congestion, space in U.S. East Coast (USEC) and U.S. West Coast (USWC) is coming online.
- Capacity/Equipment: Equipment availability is getting better as congestion eases. Low empty stacks at inland depots are also getting better in some areas, but prioritize pick-up from the Port of Loading if possible.
- Recommendation: Book 2-3 or more weeks prior to CRD. Request premium service for higher reliability and no-roll.
Indian Subcontinent → North America
- LNY brings blanks sailings and equipment issues as lack of Chinese imports results in less containers being repositioned and causes blank sailings on shared TPEB-India Subcontinent (ISC) services. This is expected to continue into early February.
- Rates: Continuing to drop week over week.
- Space: Open
- Capacity/Equipment: Capacity is being removed as carriers implement blank sailings. We are starting to see this happen on services to both the U.S. East coast (USEC) and U.S. West Coast (USWC).
- Recommendation: Be open to procuring equipment from wet ports vs. inland container depots as equipment deficits are being felt in many areas. Diversify your carrier strategy for coverage in case of blank sailings.
North America → Asia
- Capacity is available across all major services, supply has far outpaced Demand, and carriers are digging for volume opportunities.
- All services to the Asia Pacific (APAC) region have very 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.
- Equipment is available and ample in most major markets.
- Extended blank sailing programs have not been introduced or considered, so the outlook for Q1 is that most of the existing capacity will remain in place.
- Agricultural season kicking up in Q1 may have an impact on capacity availability in the near future. Even with that peak, the outlook is for supply to remain greater than Demand.
- Rates: 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. All carriers are trying to push cargo onto these lanes/services. Carriers made some adjustments in early Jan and since then the rate levels have remained flat. Deals below existing market levels are available for consistent volume opportunities.
- Space: Very open, allocation requests can be made to carriers for high volume weeks or projects with a high probability of acceptance.
- Capacity/Equipment: no major capacity changes in the market aside from blank 2 sailing weeks in Feb, with nothing planned beyond that. No major equipment hurdles to highlight in the U.S.
- Recommendation: book 1-2 weeks prior to CRD on all coastal to Asia-based port lanes, and book 2-3 weeks prior to CRD on all inland to Asia and feeder port lanes.
North America → Europe
- Capacity from the USEC is available, services from Gulf and USWC remain tight—the market is stable.
- Most USEC to N. Europe (NEU) and Mediterranean (MED) services have low capacity utilization levels with NO space constraints.
- Gulf Coast to NEU and MED services continue to have medium to high utilization levels as the market has seen a reintroduction of capacity with the OCEAN alliance services which has provided some relief. Still there are some inconsistencies in the schedules from the Gulf.
- 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 Q1.
- Rates: Rates are trending slightly downward MoM and QoQ on USEC to NEU lanes. Carriers made adjustments early in Q1 and since then rates have remained flat. Gulf and USWC rates were not adjusted in Q1 given the utilization levels on those services. Carriers are willing to make deals for USEC deals.
- Space: Space is open from USEC, manageable from Gulf, and very limited from USWC.
- Capacity/Equipment: no major capacity changes in the market, with no blank sailings planned for Feb. No major equipment hurdles to highlight in the US.
- Recommendation: book 2 weeks prior to CRD on all EC to NEU, MED lanes, book 3 weeks prior to CRD on all Gulf to NEU, MED lanes, book 4 weeks prior to CRD for all PSW to NEU lanes.
North America Vessel Dwell Times
Air Freight Market Update
- N. China: Market rates will decrease quite a bit during the LNY holiday period, starting from Jan 21st and lasting until the end of the month.
- S. China: With the lifting of all Covid measures in mainland China, cross-border traffic is expected to gradually resume.
- Taiwan: The market is operating normally. The main thing to watch out for is high passenger demand before LNY which may result in potential cargo offload.
- Korea: TPEB market demand is picking up before the long holiday while the Far East Westbound (FEWB) market is still trending downwards.
- SE Asia: Demand ex-Southeast Asia overall remains low with capacity widely available with the exception of Hanoi, which is experiencing a pre-holiday rush and will require as much advance notice as possible.
- Demand has increased as production operations return back to normal after the holiday period, this is reflected in the rate levels as they have also increased in line with demand levels.
- Lead days are stable at the moment as airline utilization is high & uplift can be procured within 2 days of CRD. No disruptions have been recorded across the main EMEA hubs & and no congestion across point pairs.
- 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
- 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.
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)
US Domestic Trucking Market Trends
- The national Outbound Tender Rejection Index (OTRI) failed to rise above 6% during the week of Christmas for the first time in its five-year history.
- Rapid demand erosion resulting from overstuffed inventories and eroding consumption coming out of an overstimulated goods economy are the main factors driving the weakening transportation markets. These conditions are forecast to persist through the first half of 2023 at a minimum.
- With little to no disruption to carrier networks, the spot market will be filled with discounted freight in what is typically the slowest time of the year for domestic trucking.
Customs and Compliance News
U.S. to Appeal WTO Ruling on Hong Kong Marking Requirement
On January 27, the U.S. submitted a notification of appeal challenging the World Trade Organization (WTO) dispute settlement panel’s decision that the U.S. violated the WTO’s General Agreement on Tariffs and Trade (GATT) by requiring goods made in Hong Kong to be marked as made in China. The WTO Appellate Body remains unable to hear cases, leaving the appeal in legal limbo.
CBP Details UFLPA Region Alert Deployment
On January 26, U.S. Customs and Border Protection (CBP) released a Trade User Information Notice on the Uyghur Forced Labor Prevention Act (UFLPA) Region Alert enhancement to the Automated Commercial Environment (ACE). The Notice confirmed that the Region Alert will be deployed on March 18, 2023. Three new validations will be added to ACE that may impact the Cargo Release and Manufacturer Identification Code (MID) applications where a valid Chinese postal code is required. CBP has also published the Region Alert deployment updates in the January 2023 ACE Development-Deployment Schedule.
CBP Reviewing First UFLPA “Exception Requests”
During a January 26 webinar, Therese Randazzo, special adviser in the U.S. Customs and Border Protection (CBP) Forced Labor Division, stated that the first two “exception requests” under the Uyghur Forced Labor Prevention Act (UFLPA) are currently under review by CBP. If merchandise is detained under the UFLPA and has a connection to Xinjiang or to an entity on the UFLPA Entity List, the importer may request an “exception” to have their goods released. When an exception is granted, CBP must submit to Congress and the public a report identifying the good and the evidence considered in reaching the determination that an exception is warranted.
Freight Market News
Declining Europe-US Rates, But Almost Triple Pre-Pandemic Levels
The rise in popularity of USEC ports as a result of the pandemic-related congestion along the USWC is expected to remain in place, even after some volume shifts back. According to FreightWaves, even after recent declines, the Europe-USEC spot rates remain almost triple their pre-pandemic levels and more than triple the rates in the Asia-USWC market.
Capacity Control to Prevent Rates from Falling Further
According to The Loadstar, recent research out of South Korea predicts that container freight rates will be determined by how liner operators control their shipping supply, versus cargo demand. Concurrently, shipping lines agreed that stabilizing freight levels would maximize profits, rather than raising market share.
Flexport Research Updates
Weekly Economic Report: The Year in Consumption
End-of-year numbers indicate a slight drop in personal spending, but taken in the context of the entirety of 2022—goods consumption stayed relatively stable through the year. In related news, U.S. real Grood Domestic Product (GDP) grew while inflation was down slightly at year-end. And in politics, the Biden administration announced its intention to move forward with the Americas Partnership for Economic Prosperity trade talks.
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 ↓ @ 9.0 days, FEWB ↑ @ 11.0 days.
Ocean Timeliness Indicator: TPEB ~ @ 67 days, FEWB ↑ @ 76 days.
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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.