COVID-19 Latest Updates

Air Rates Remain High Despite Increased Capacity, a New FMCSA Ruling, and a Rebound for Oil Prices

By May 21, 2020 No Comments

U.S. Customs

As a reminder, the deadlines for importers to give comments on Section 301 tariff exclusions are approaching quickly. Public comments are open for List 1 and 2 until June 1, and List 3 comments are open until June 8. In total, these exclusions cover roughly $250 billion worth of goods from China. 



As of this week, every state in the U.S. has dialed back stay-at-home restrictions to some extent, and consumers are clearly feeling the shift. U.S. airlines have started to see a glimmer of an uptick in passenger demand, offering hope for airfreight capacity. In spite of this, air freight rates have been largely unaffected, and remain highly volatile. 



The major decrease of global economic activity caused by COVID-19 has flooded the bunker market with low-sulfur fuel, meaning ocean carriers may enjoy relatively cheap fuel prices for months to come. As diesel and jet fuel demand has dropped dramatically during the pandemic, the bunker market has been the last resort for refineries looking to sell their surplus oil. This sudden surge in supply has had significant impacts, and as of last week, the price of low-sulfur bunker fuel was roughly 50% of where it stood in March.  

Despite these major drops in fuel costs, ocean rates stay highIn an effort to mitigate shifting demand and recoup major financial losses in Q1, carriers continue to cut capacity. The high rates of blanked sailings and rolled shipments don’t seem to be going down any time soon, and cargo owners may continue to pay the price for the impact the COVID-19 outbreak has had on the ocean freight industry. 



Feeling the brunt of demand shifts, the Ports of Seattle and Tacoma reported a 23.5% year-over-year drop in volume for the month of April. Placing blame on both the COVID-19 pandemic and the trade dispute with China, the ports expect things to improve slightly, still anticipating high counts of blanked sailings throughout the summer. 



Last week, the Federal Motor Carrier Safety Administration (FMCSA) issued a new ruling, relaxing regulations for truck drivers. The ruling offers an increase in flexibility for how drivers manage hours and rest periods, along with certain flexibilities that may make Hours of Service regulations more difficult to enforce. These rule changes may end up putting more power in the hands of shippers, as it’s expected to increase truck capacity.  

As states slowly begin to open and typical late spring surges hit, capacity is starting to pick up. Trucking capacity is tightening in major hubs like Los Angeles, Houston, Atlanta, and Memphis, and overall traffic seems to be increasing throughout most of the U.S. Reflecting this, reports show a slow increase in spot rates as well. 


Other News

 A year-to-year comparison of U.S. import distribution shows that, in the first 4 months of 2020, the proportion of American imports from China has fallen nearly 8% from the same time period in 2019. This recent trend of U.S. companies shifting sourcing away from China has been accelerated by the ongoing trade war between the two nations and the COVID-19 pandemic. As more U.S. companies seek to create more stable, resilient supply chains, countries like Vietnam and South Korea have become more popular sourcing options. If you’re currently evaluating your sourcing strategy, don’t hesitate to reach out to the Navegate Imports Team for help. 

Demand for oil in China has rebounded to near pre-pandemic levels in a positive sign for the economy of the country. Experts attribute this resurgence in demand to manufacturers resuming their production and individuals opting to drive cars instead of riding public transit in hopes that they protect themselves from exposure to COVID-19. This news comes only a few weeks after oil prices collapsed due to weak demand amid global economic shutdowns.