MARKET BRIEF | November 2020
Insights and stories for the logistics, shipping, and transportation industry.
EXAMINING THE MARKET IN 2020
Like most markets, freight rates are determined by supply and demand. Volume, capacity, and environmental issues (hurricanes, winter storms, wildfires, and even civil unrest) are all factors that affect these rates. Obviously, 2020 has seen all these things — some even converging simultaneously!
Additionally, the economic impacts of COVID-19-induced shutdowns has affected the market in various ways. Initially, there was a huge push for grocery items, which was panic driving food and paper goods sales. That was followed by a few-week period of replenishing goods, then a dive in the market, as consumers were hesitant to spend money — fearing a decline in the Economy. That decline eventually did happen, as brick and mortar retail, dining, construction, and other industries came to a halt. Negative downstream effects ensued, resulting in the shuttering of smaller trucking companies, a reduction in imports (because of low factory production), and the cancellation of freight contracts.
A turnaround occurred in Q3, driven by great demand for PPE and shifts in consumer spending, such as an increase in sales for home office items, recreational equipment, and boosts in e-commerce. Manufacturing saw a rise, and auto part loads came back. And, since the smaller carriers were no longer in business, freight rates naturally rose.
That brings us to Q4. October saw an all-time high for an average national rate per mile, and the consumer shift has led to new lanes for shippers. Imports are way up, as companies ease their product backlog into the U.S., resulting in port congestion and tightening warehouse space. Freight has to be moved immediately to alleviate space, and companies are taking advantage of comparable rail rates and trucking rates, thus, longer transit times to buy time to free up capacity.
What will happen the rest of the year? The normal holiday retail surge will be dispersed over a longer period of time. The tender rejection rate — a good indicator of market volatility — has already rose 2%, which is a few weeks earlier than usual. And, of course, expect the unexpected. Why? Because it’s 2020!
Like most markets, freight rates are determined by supply and demand. Volume, capacity, and environmental issues (hurricanes, winter storms, wildfires, and even civil unrest) are all factors that affect these rates. Obviously, 2020 has seen all these things — some even converging simultaneously!
Additionally, the economic impacts of COVID-19-induced shutdowns has affected the market in various ways. Initially, there was a huge push for grocery items, which was panic driving food and paper goods sales. That was followed by a few-week period of replenishing goods, then a dive in the market, as consumers were hesitant to spend money — fearing a decline in the Economy. That decline eventually did happen, as brick and mortar retail, dining, construction, and other industries came to a halt. Negative downstream effects ensued, resulting in the shuttering of smaller trucking companies, a reduction in imports (because of low factory production), and the cancellation of freight contracts.
A turnaround occurred in Q3, driven by great demand for PPE and shifts in consumer spending, such as an increase in sales for home office items, recreational equipment, and boosts in e-commerce. Manufacturing saw a rise, and auto part loads came back. And, since the smaller carriers were no longer in business, freight rates naturally rose.
That brings us to Q4. October saw an all-time high for an average national rate per mile, and the consumer shift has led to new lanes for shippers. Imports are way up, as companies ease their product backlog into the U.S., resulting in port congestion and tightening warehouse space. Freight has to be moved immediately to alleviate space, and companies are taking advantage of comparable rail rates and trucking rates, thus, longer transit times to buy time to free up capacity.
What will happen the rest of the year? The normal holiday retail surge will be dispersed over a longer period of time. The tender rejection rate — a good indicator of market volatility — has already rose 2%, which is a few weeks earlier than usual. And, of course, expect the unexpected. Why? Because it’s 2020!
IMPORT / EXPORT RATE NOTES
Quick hits:
Quick hits:
- Air import rates are spiking — almost double what they were last month.
- Ocean import space remains tight, and is trending in a negative direction. (This is likely affected by the increased air import rates.)
- Air and ocean export rates, however, remain steady.
OCEAN SHIPPING UPDATES
Asia Container Shortage
In recent week, trans-Pacific carriers, including those offering premium services, have been unable to fulfill all of their bookings due to the container shortage in Asia. These container shortages are so severe, that carriers are sometimes unable to guarantee that customers’ equipment will be available at the Asian load ports they serve. This has impacted the Chinese ports of Xiamen, Ningbo, and Shanghai, where vessels are frequently leaving Asia without full loads because there is not enough equipment to be found.
Truckers Urge Suspension of Fees
Drivers servicing the Ports of Los Angeles and Long Beach are asking for a suspension of detention and demurrage charges. Shippers and truckers are being held accountable for millions of dollars of additional charges, despite not being able to return empty containers or pick up empty cargo. Port congestion has caused increasingly delayed turnaround at truck terminals, which has led an accumulation of fees.
News from the water and the ports:
Asia Container Shortage
In recent week, trans-Pacific carriers, including those offering premium services, have been unable to fulfill all of their bookings due to the container shortage in Asia. These container shortages are so severe, that carriers are sometimes unable to guarantee that customers’ equipment will be available at the Asian load ports they serve. This has impacted the Chinese ports of Xiamen, Ningbo, and Shanghai, where vessels are frequently leaving Asia without full loads because there is not enough equipment to be found.
Truckers Urge Suspension of Fees
Drivers servicing the Ports of Los Angeles and Long Beach are asking for a suspension of detention and demurrage charges. Shippers and truckers are being held accountable for millions of dollars of additional charges, despite not being able to return empty containers or pick up empty cargo. Port congestion has caused increasingly delayed turnaround at truck terminals, which has led an accumulation of fees.
CUSTOMS NEWS
The latest happenings in international exchange:
Forced Labor
In a civil enforcement action by U.S. Customs and Border Protection (CBP), $575,000 in fines were collected from Pure Circle U.S.A., Inc. The penalty, pertaining to forced labor, is the first action since the passage of the Trade Facilitation and Trade Enforcement Act of 2015. This is part of the CBP’s continuing effort to prevent forced labor manufactured goods from entering the United States. CBPs Executive Assistant Commissioner of the Office of Trade, Brenda Smith, stated, “As part of its trade enforcement responsibilities, CBP will hold companies accountable for importing goods produced with forced labor. Companies have a responsibility to proactively monitor their supply chains to mitigate the risk of importing goods into the United States that were produced with forced labor.”
Record Retention 101
Need a good understanding of Customs’ record retention? Here are the specifics:
§ 163.4 Record retention period.
The latest happenings in international exchange:
Forced Labor
In a civil enforcement action by U.S. Customs and Border Protection (CBP), $575,000 in fines were collected from Pure Circle U.S.A., Inc. The penalty, pertaining to forced labor, is the first action since the passage of the Trade Facilitation and Trade Enforcement Act of 2015. This is part of the CBP’s continuing effort to prevent forced labor manufactured goods from entering the United States. CBPs Executive Assistant Commissioner of the Office of Trade, Brenda Smith, stated, “As part of its trade enforcement responsibilities, CBP will hold companies accountable for importing goods produced with forced labor. Companies have a responsibility to proactively monitor their supply chains to mitigate the risk of importing goods into the United States that were produced with forced labor.”
Record Retention 101
Need a good understanding of Customs’ record retention? Here are the specifics:
§ 163.4 Record retention period.
- General. Except as otherwise provided in paragraph (b) of this section, any record required to be made, kept, and rendered for examination and inspection by Customs under § 163.2 or any other provision of this chapter shall be kept for 5 years from the date of entry, if the record relates to an entry, or 5 years from the date of the activity which required creation of the record.
- Exceptions.
(1) Any record relating to a drawback claim shall be kept until the third anniversary of the date of payment of the claim. READ MORE
HURRICANE PREPAREDNESS
Peak season for Hurricanes is upon us, especially with the recent arrival of Hurricane Eta. Know how to be prepared. The National Weather Service provides resources for hurricane preparedness.
(Image of Hurricane Eta via NOAA.)
Peak season for Hurricanes is upon us, especially with the recent arrival of Hurricane Eta. Know how to be prepared. The National Weather Service provides resources for hurricane preparedness.
For more information on Aeronet Worldwide, visit Aeronet.com.
