Ship-ageddon!
First it was supply shortages, then we were hit with (consumer) demand shortages.
Now it’s shipping capacity shortages. And there seems to be no end in sight.
During the past two weeks air freight rates from Shanghai to North America hit their highest level since June reaching $6.07 per kg, according to Tac Index figures.
That’s a massive 20 percent increase from 2019.
Air freight rates from Hong Kong to Europe are now at $3.82 per kg, which is the highest level since the start of July.
Full one-way charters from China/North Asia to the US are being sold between US$1.3-1.5 million with a few limited opportunities left for the November/December time period, according to Flexport.
Ocean capacity is also strained, and delivery times are under pressure due to worsening port congestion, particularly in Los Angeles and the UK.
The demand out of Asia is so great, and the premiums are so high, that carriers would rather send their equipment back empty then wait around in the EU or US for an export load.
Analysts and shipping industry executives are divided over the outlook, past the holiday season rush.
Some see surging demand through early 2021. Others fear a ‘second wave’ of the pandemic could severely reduce consumer demand.
What’s driving demand (not PPE), Outlook for Q4
READ MORE
Tracking Supply Chain Shifts
TRADE DEALS
Cambodia is set to officially join RCEP (Regional Comprehensive Economic Partnership) next month during the 37th ASEAN Summit.
- 15-nation trade deal will open new market opportunities for Cambodia, just months after it lost EBA.
- Earlier this month, Cambodia signed an FTA with China.
The U.S. has renewed the Caribbean Basin Trade Partnership Act (CBTP).
- The agreement provides duty-free eligibility for textiles and apparel made from U.S. yarns and fabrics.
- Haiti has been the largest beneficiary.
LOGISTICS
Freight Rates Stay Steady, Capacity is the Problem
Much to the relief of shippers, freight rates are going their fourth week without increases. However capacity remains a problem.
While demand continues to surge, and could remain strong through early 2021, there are also fears that a second wave of coronavirus hurt retail sales in the U.S. and parts of Europe.
- Expected rate increases in November even with capacity up 20% over last year point to strong demand through the end of the month at least.
- Air cargo rates are climbing – from 25% to 45% on lanes from China to the US and Europe – as peak season and still-limited passenger flights keep space tight.
- Southeast Asia to Amazon warehouses in the US, ocean rates remained steady for Amazon sellers too, though air rates have increased 43% since the start of the month.
DHL Express has hired 10,000 additional workers as it prepares for record volumes in the run-up to the holiday season.
MATERIALS
U.S. cotton prices topped 70 cents this week as global mill demand recovers, particularly in Southeast Asia.
Indian cotton prices are likely to remain below the market support price (MSP) for most of the 2020/21 season due to a record level of carryover stock, according to the Cotton Association of India (CAI).
- Carryover stock is up 236% year-on-year as COVID caused an industry shutdown.
- Mills are now back to 95% capacity,
China’s polyester demand is expected to remain healthy till the end of October amid rising feedstock cost and improving export demand, according to ICIS.
- As India’s textile industry recovers from COVID, China is likely to see a drop in orders.
- Polyester demand is expected to drop as year-end is typically a slow period for the textile industry.
Australian wool prices increased this month driven by Chinese domestic demand, as demand from the U.S. and EU remained weak.
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ALSO THIS …
REI Co-op (USA) has said that early sales trends indicate for activewear winter gear is up 3-4 times 2019 sales.
- Increased interest in items like next-to-skin base layers, mid-layers, and outerwear, for layering.
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