Global Freight Market Insights

There are many factors that have contributed to the current volatility within the global supply chain. Some of these factors will continue to be influential into 2022.

Covid-19 disruptions

• Quarantines, lockdowns, and port closures
• Vaccine hesitation and ongoing transmission
• Regional resurgence and variants
• Difficulties with social distancing in ports, warehouses, and terminals

Labor constraints

• High labor costs
• Surging consumer demand versus labor shortages

Increased demand of goods

• Limited supply and higher prices

Operational changes

• Export screening requirement
• Consolidation and ground handling agents

Global trade and tariff issues

• China-United States trade
• Generalized Systems of Preferences (GSP) and Miscellaneous Tariff Bill (MTB) developments
• Rise in Anti-Dumping and Countervailing Duty (AD/CVD) enforcement

Global logistics obstacles

• Ocean carrier consolidation with inventory levels the lowest since 1990s
• Airport congestion

• Shanghai will receive a boost in capacity the end of November following the completion of the China International Import Expo
• Capacity is stretched and rates are high across most of east Asia, and can be expected to continue through November
• Cargo demand in India (both inbound and outbound) is outstripping capacity resulting in extended transit time and higher rates
  • Ocean challenges leading to heightened levels of ocean-to-air conversion cargo, particularly in south India
  • A travel ban was lifted November 8, but the impact on capacity has yet to be determined
• Transatlantic demand has been increasing in recent weeks and spot market rates are climbing
  • Easing of travel restrictions into the United States started early November, but short term capacity increases are unlikely until seats on existing flights are filled
  • Terminal congestion in Frankfurt, Germany affecting imports and exports
  • Terminal congestion growing in Amsterdam as a result of labor challenges
• North America southbound capacity to South America remains constrained
  • Freighter operators already using their full fleets
  • Limited additional passenger flights entering the market as COVID-19 restrictions remain in place
  • Spot market rates continue to trend up
• U.S. air import terminals remain congested
  • Airport terminal operations remain a challenge across the United States, though some of the extreme delays experienced during the summer months have eased
  • Gradual improvements on the labor front, but airport terminals remain understaffed

Air freight capacity

Impacts include:

• Reduction in passenger flights since the start of the pandemic
• Increase in freighter activity cannot cover the gap
• Flights arrive in waves versus daily pattern of passenger flights pre-COVID-19—this creates a large influx at one time and overwhelms warehouses, which are further constrained by labor shortages

Note: The map above indicates total air cargo capacity growth from June 29 to July 12, 2021 versus the same week in 2019.

Air freight demand

Industry CTKs (billions per month)

Sources: IATA Economics, IATA Monthly Statistics

Impacts include:

• Inventory levels as percentage of sales are at historic lows
• With global supply chain disruptions, demand is at an all-time high
• Demand surge is distributed across various sectors as well as a result from switching ocean reliant cargo to air

Airline terminal and warehouse challenges and solutions

Challenge: Rapidly changing conditions in many regions
Solution: Proactive conversations and weekly guidance

Challenge: Import and export delays causing product scarcity and rising costs
Solution: Increased notifications on terminal dwell times and adding alternative vendors, warehouses, and trucking options

Challenge: Labor shortage compounded by recent changes in export screening requirement
Solution: Re-directing freight to airlines or airports which are less impacted and leveraging truckload capabilities at origin and/or destination

Challenge: Availability of consolidation and ground-handling agents
Solution: Physical presence at terminals and warehouse to recover and prioritize C.H. Robinson freight

Air freight market outlook

Jet Fuel Price Index (2000 = 100)

Source: Platts

Impacts include:

• Strong future growth indicators
• Increase in export orders
• Jet fuel rebound, during peak season
• Terminal congestion variability
• Capacity at a premium 

• Consistent improvement with available vessel space—for example, U.S. East Coast ports to Europe, and the Canada gateway for U.S., Midwest cargo to Europe through Montreal and Halifax ports
• Continued rail delays from the U.S. Midwest to both U.S. East Coast ports and to Canada, but overall, the situation has improved
• An increase in Europe port omissions, because of the growing port congestion issue in Europe, particularly at Hamburg, Rotterdam, and UK ports—UK port congestion surcharges are still being applied by ocean carriers
• Average delays at Australia ports are extending to 7–9 days in the wake of resolutions with MUA and the Port of Melbourne
• Space is expected to continue to be extremely tight on the Asia-Europe trade lane as high demand persists
• Some of the Port of Los Angeles/Long Beach terminals, such as TTI, are taking steps to relieve congestion by extending their gate hours—and some railways such as the Burlington Northern Santa Fe (BNSF) are offering weekend gates to try and improve fluidity
  • The Biden Administration has stepped in to bring together more stakeholders, including major importers, to encourage the opening up of port hours to help reduce port congestion—it remains to be seen whether sufficient warehouse labor and truck resources can be found to ensure the success of those efforts
• Port of Los Angeles/Long Beach authorized Excess Dwell Fees for long dwell containers that will be passed on to carriers at nine days for local cargo and at six days for rail moves for a $100 incremental charge
• Congestion in the United States continues, for example:
  • LAX/LGB: 77 ships at anchor or in the drift area
  • The average dwell to berth 13–16 days
  • Chassis shortage port wide
  • Terminals are congested at 80–90% utilization

Ocean rate trends

U.S. West Coast

Freightos Baltic Index (FBX)
FBX01 China/East Asia – North America West Coast
22-Oct-21 | $16,884

FREIGHTOS © Freightos Limited Licensed under the Freightos Master Services Agreement.
fbx.freightos.com
Data Source: Freight Rate Index/Freightos Baltic Container Index

U.S. East Coast

Freightos Baltic Index (FBX)
FBX03 China/East Asia – North America East Coast
22-Oct-21 | $20,291

FREIGHTOS © Freightos Limited Licensed under the Freightos Master Services Agreement.
fbx.freightos.com
Data Source: Freight Rate Index/Freightos Baltic Container Index

Ocean schedule reliability

Impacts include:

• As a result of COVID-19 safety protocols, Suez Canal blockage, and Yantian port closures, carriers must use blank/void sailings to mediate the congestion
• Schedule adjustments improved congestion briefly but were constrained again by Yantian International Container Terminal (YICT) disruptions
• Demand continues to increase, creating vessel bunching, berthing delays, and reduced yard capacity

Data Source: Sea-Intelligence ApS

Data Source: Sea-Intelligence ApS

Data Source: Sea-Intelligence ApS

Navigating today’s ocean market

• Forecasting is paramount
  • Best practice is to forecast out 6–8 weeks minimum
• Consistency drives performance
  • Prioritization
  • Is there enough variability in SKUs and/or parts
  • Smoothing of volumes week-to-week
• Be flexible in all facets of shipment life cycle
  • Routings
  • Carriers/services
  • Modes
  • Equipment
  • Pricing

• The launch of the new chassis pool for the Port of Charleston, South Carolina has been delayed six months because not enough chassis can be built or leased in time for the original May 2022 launch date
• The Port of Savannah, Georgia is now offering extended gate hours from 7-11 p.m., Monday-Friday for loaded and empty imports only
• Because of market conditions throughout the Ohio Valley region, carriers are backlogged and many are not currently accepting new business—they are refusing special moves like hazardous, overweight, and long hauls—import freight is favored over exports
• All markets continue to struggle with limited equipment and yard space nearing capacity
• Transloading in the Northeast region, although not as cost-effective, is the best way to approach lanes over 150+ miles each way

Inland drayage: What can you expect?

• Steam Ship Line (SSL) contracts to reduce free time
• Increased import volumes
• Equipment shortages linger further inland
• Forecasting and lead time needed to support capacity
• SSL’s door pick/drop solutions failing because of lack of capacity
• SSL’s pausing export freight bookings and rail embargoes causing interruptions through quarter four
• Port and ramp appointment systems impacting carrier turn times
• Detention, demurrage, and wait-time increases—and limited dual transactions
• Rail and port talent retention struggles

Inland drayage—cause and effect

Rerouting of cargo:

• Rerouting to nonaffiliated entry ports
• Ripple effect of carrier capacity and chassis sourcing
• Capacity lead times continue to rise
• Charleston, South Carolina port-controlled chassis pool is nonexistent

Solutions to consider:

• Be open to diversified modes
• Focus on building strong relationships
• Be prepared to identify alternative options for door pickup and delivery
• Understand market dynamics in shipping to and from the United States
• Forecasting and planning should be required—not optional

• Time is running out on the chance to request the United States Trade Representative (USTR) to extend previous duty exclusions
• Right now, there is a limited-scope, limited-time opportunity to potentially avoid some of the Section 301 (China) tariffs, while also having the opportunity to recover duties previously paid on imports during the last few months of this year
• The USTR comment period is open until December 1, 2021
• The USTR is allowing the public to comment on whether to reinstate certain Section 301 China tariff product exclusions. As published within the Federal Register notice, the agency intends to evaluate 549 product exclusions—on a case-by-case basis—with the possibility of granting extensions. Most of these expired as of December 31, 2020. If reinstated, the exclusions would be retroactive for eligible entries on or after October 12, 2021.
• Learn more about what drives reinstatement and more